4 Financial Tips When Preparing for a Divorce
By Phil Mitchell CFA, CPA
Kroon & Mitchell Integrated Tax and Investments
No matter how you look at it, divorce is never easy. It’s an emotional and financial roller coaster and many participants simply hang on tight and wait till the ride is over. Instead of maintaining a passive perspective, we at Kroon & Mitchell promote proactive engagement and self-advocacy. In other words, to come out of the other end of a divorce with a stable financial future, you’re going to have to roll up your sleeves and dig into the details.
While divorce can be scary and uncertain, from a financial perspective, there can be clarity and strength when you approach the proceedings prepared with a complete understanding of your financial background. Here are a few tips to get you there.
#1.Take emotion out of the equation.
When it comes to your finances, numbers are numbers. Emotions like anger, resentment, regret, sorrow, or even apathy don’t change them. While all these feelings are ok to have, you need to check them at the door when it comes to money. When you let feelings take control, rash, unfounded decisions are made, not based on the data, but based on emotion insecurities. Approach your finances from a non-emotional stance, you’ll be all the better for it.
#2. Don’t rely on friends and co-workers for financial advice.
When friends, family, and co-workers hear you’re going through a divorce, their natural inclination is to share their story if they have one. Do this, don’t do that, heed my advice! But, don’t. Only take legal, tax and financial advice from your lawyer, CPAand a financial professional, because nobody has a story that’s exactly the same as yours.
#3. Work with your financial advisor to educate and prepare yourself.
Through a natural division of family responsibilities, there’s usually one person in charge of the family’s overall finances. That may include bills, investments, taxes, retirement accounts, etc. If that person isn’t you, make an appointment with your CPA and your trusted financial advisor as soon as possible.
Together, go through your finances and assets. Educate yourself and take the time to fully understand what’s happening. Because whether or not you’ve been involved in the finance part of your life before, now you’re responsible for everything. Yes, it’s difficult and sometimes scary to make big decisions when you’ve never been engaged in the process, but that’s why it’s more important than ever to work with a professional and get yourself prepped and ready for anything.
After all, how can you make sure you receive a fair share when you have no idea what you have in the first place?
#4. Live within your means.
According to Kathey Batey, author of Suddenly Single, www.DivorceSupportAnonymous.com“Don’t be careless with finances right now. Keep your life as simple as possible until the divorce is final.”
Remember, both parties own all financial assets until the divorce is filed and finalized. Now is not the time to go on a spending spree, quite the opposite. Divorces are expensive and can quickly careen out of control if they aren’t settled outside of court. When you’re in the thick of it, establish a budget and do your best to live within or under your means. After the divorce is over, and you have a clearer picture of your finances, adjust as you see fit.
The most important lesson to take out of this is to be prepared and pro-active. Through divorce or the unexpected loss of a loved one, there may come a time when your family’s financial future is placed squarely on your shoulders. Be ready for that. Get informed about your finances in advance and take a seat at the table. Know who your financial advisor is and go to the meetings together. Functioning from a partnership perspective from the beginning will help ensure a stable future no matter what happens along the way.
This article was provided by Phil Mitchell, CFA, CPA of Kroon & Mitchell, a Grand Rapids, Michigan firm that specialized integrating tax and investment.