The financial experts at the Wall Street Journal have recently noticed that because of the improving economy and the six-year-long bull market, more couples these days are considering divorce. However, the publication also warned that despite the economy, pursuing a divorce can be expensive, an individual’s cost of living is likely to increase and homeowners going through a divorce must be careful in the disposition of a home as it is one of the nation’s hottest housing markets in memory. By carefully considering these frequently made mistakes, couples can make more rational financial decisions when emotions are running high.
Overlooking Assets and Underestimating Costs
Even if you weren’t involved with the home’s finances during the marriage, it’s critical to have a handle on your finances after you have decided to pursue a divorce. It’s important that you understand your assets and liabilities by accessing all financial documents including tax returns, bills, statements from investment and retirement accounts, stock options, shared debts, and credit card statements. Your lawyer should be able to help you in this process, and you may need appraisals. If you don’t have an accurate idea of what you’re worth, you’re going to come up short in the settlement.
The Wall Street Journal is also an advocate of creating a budget so you can more easily adjust to a change in your standard of living – if necessary. According to The Wall Street Journal, “one thing is almost certain: there will be unforeseen expenses.”
As you may have to decrease your spending during or after a divorce, the publication recommends intensive budgeting, which includes tracking your food, clothes, bills, and discretionary purchases that you may have to cut out of your budget. Lastly, don’t forget to “be sure to include the impact of inflation.”
Keeping the House
Many couples put a high level of importance on keeping the house, as they want to keep children in their school district and hold on to memories that were made in the house. However, many people have on rose-colored glasses and don’t factor in that the home will be much harder to maintain with one less adult contributing to the mortgage payment, taxes, utilities, maintenance, and upkeep.
The Wall Street Journal recommends considering one route of selling the house, splitting the proceeds during the divorce proceedings, and having both parties share the risks and costs associated with selling the home.
Thinking the Work is Done
- Once an agreement is reached, divorce papers signed, and assets divided, don’t forget to update all of your legal documents. Update your will to reflect your divorce, as I discussed in my two recent blogs, America’s Last of Will(s) and What Happens to Your Will in a Divorce (link to come)
- Update any health-care proxy or power of attorney that names your former spouse
- Transfer the titles for any real estate, cars, investments, or any other assets that were held jointly
- Lastly, “change the passwords on all of your accounts.”