For many, if not most, people, divorce is going to have a significant financial impact. As is generally the case, however, its impact can be minimised by mindfulness and planning. With that in mind, here is a quick guide to the financial points you should consider when getting divorced.
Separate your everyday finances as quickly as possible
At a minimum, set up a current account in your own name for your own income and expenses. See if you can come to an arrangement with your spouse that allows you to close your joint account.
For example, if it’s clear that one party will keep the family home, try to move bills into that person’s name. The other person should carry on paying their share of them pending the divorce settlement.
Keep in mind that nothing is set in stone until the settlement is finalised. If you feel like you are paying more than your fair share, you can raise the matter during the settlement negotiations.
Prioritise setting a new budget as a separate individual
Updating your budget is likely to be a work in progress as you go through the journey of your divorce. What’s more, it’s unlikely to end when your divorce is finalised and you have set figures to work with.
Firstly, you’re going to have to refamiliarise yourself with living life as an individual rather than as half of a couple. Secondly, you’re going to have to adapt to the changes life will inevitably bring your way. These changes can come very quickly after a divorce.
Actively work on your individual credit score
The more your finances have been merged with your spouse’s, the more your credit score will have become merged with your spouse’s. You may therefore need to work actively on (re)building it under your own name.
Building a credit score is largely a matter of time. There are, however, some administrative steps you can take. For example, you can ensure that you always stay on the electoral roll, even if you move house.
Remember that your credit score can impact much more than your ability to get credit. It is also likely to be checked by potential landlords. It may be checked by potential employers.
You should also make a point of checking your credit report regularly (at least once a month). It’s easy and free to do this online. You just need to register with the credit bureaux.
The reason why this is so important is that you need to keep a sharp eye open for any unexpected items. If you see anything you do not recognise, you need to follow it up immediately. You should also make any relevant parties aware of your actions.
Gather (and organise) your financial documentation
Financially, divorce is a process of dividing and separating both assets and liabilities. This has two implications. Firstly, you need to know what your assets and liabilities are. (You also need to know where they are).
Secondly, you need somewhere to put your share of the divorce settlement. Ideally, you should have accounts ready to receive assets and/or manage liabilities. This can help to speed up the process of separating your finances from your spouse’s.
Use mediators instead of lawyers as much as possible
It is highly advisable to have the final divorce settlement overseen by lawyers. Up to that point, however, it is generally very much preferable to use mediators. There are two main reasons for this.
The financial reason is that this approach generally costs a lot less than paying lawyers to do everything. The non-financial reason is that it generally makes for a more relaxed (or less tense) atmosphere. This can help negotiations go more smoothly and hence more quickly.
