Going through a divorce can be an emotionally and financially difficult time. When emotions run high, it’s easy to make poor financial decisions that could impact you for years to come. Being proactive about protecting your finances is essential.
According to a 2024 US News survey, 20% of divorces involved a dispute over shared debt. What’s concerning is that 75% of divorcees admitted to simply figuring things out financially as they went along during the process. Without proper planning, many struggle to manage their money wisely post-divorce. By taking steps to safeguard your finances early on, you can avoid long-term problems. Here are some tips for keeping your money safe during a divorce.
Consult a Divorce Attorney
One of the first things you should do when preparing for divorce is to speak with a divorce lawyer. An attorney can help you gain clarity on your overall financial picture, identify assets, create budgets, and start planning for your future financial needs. Having professional guidance can help you make level-headed decisions rather than reacting emotionally.
Create Detailed Records of All Assets
To protect your finances in a divorce, you need clarity on what assets you and your spouse have accumulated during the marriage. Make copies of all financial statements, including bank accounts, investment accounts, property deeds, vehicle titles, and credit card statements. Also, document valuables like jewelry, art, and collectibles. Providing detailed records to your divorce attorney allows them to negotiate a fair settlement.
Manage Credit Wisely
Credit use should be carefully monitored during a divorce. It’s wise to pull your credit reports and scores to understand how existing debts will impact you going forward. Be cautious about adding new credit cards or loans in your name only—that debt may be considered communal property if acquired before the divorce is finalized. Around 66% of divorcees have shared debts with their former spouse in the form of credit card debt (42%), mortgage debt (38%) and car finance (30%).
Split Up Joint Accounts
Any joint checking, savings, investment, and credit card accounts should be divided up or closed as part of the separation process. Cancellation of joint credit cards should be done delicately to avoid damage to credit scores. Don’t leave yourself vulnerable by staying tied to joint accounts.
Examine Beneficiaries
Review beneficiaries on retirement accounts, life insurance policies, and bank accounts previously designated to an estranged spouse. These designations don’t automatically change after divorce unless specified legally in the settlement. Protect your assets by making these changes.
Build an Emergency Fund
After a divorce is finalized, it’s essential to have quick access to cash to cover expenses in your new budget. Experts recommend saving at least 3-6 months of living expenses in a savings account. An emergency fund prevents you from having to liquidate other assets or accrue credit card debt to pay for unexpected costs. Make this savings cushion a top priority.
Let Go of Emotions
Divorce negotiations stir up many emotions that can cloud wise decision making. Anger, bitterness, fear, and vengeance can motivate you to fight for assets you don’t actually need or make unreasonable demands. Consult your support team of legal and financial experts before making any big decisions. Keeping emotions out of financial planning protects your stability.
By taking proactive steps to protect your finances, you can gain confidence and clarity during a challenging transition. Seeking guidance from professionals ensures you make the best choices to support a secure financial future post-divorce. With mindfulness and care, your finances can survive divorce intact.