Divorce is something we never want to think about, but unfortunately it happens. And when it does happen, it can be a very emotional and stressful time. It affects all aspects of your life, including your financial livelihood. You will more than likely be faced with many financial decisions, and we want to let you know we are here to help you through them. Making smart choices and taking the right steps will help minimize further turmoil and hopefully transition you for the next phase of your life. We have compiled some tips below to help you succeed in keeping your finances straight while establishing your newfound financial independence.
Set up your own account.
While you may be getting a divorce from your spouse, that does not mean you have to divorce your financial institution…even if you were the one who “married into” the financial relationship. Unless you choose to leave, the feeling at most places, like Avadian, is: “once a member always a member!” In fact, it may be easier to stay with your current financial institution who already knows you and your financial history. Why suffer from two breakups?
With that said, it is best to sever all financial ties from your spouse as soon as possible. If you have joint accounts, keep in mind your spouse probably knows your account number, personal identification number (PIN) and passwords. It’s best to establish a new account in your name as opposed to simply removing your spouse from existing ones. Once you do this, you can move forward.
Important Tip: For a woman going through a divorce, one important decision to make is whether or not to reclaim her maiden name. If a name change is in your future, it may be easier than you think. You can request that the judge handling your divorce make a formal order restoring your former or birth name. If your divorce decree contains such an order, that's all the paperwork you'll need. You'll want to get certified copies of the order as proof of the name change. Once you have this official documentation, you can use it to have your name changed on your identification and personal records. To change your kids’ names is a little more difficult and is usually determined by a judge.
Cool Hookup: For more information on changing your name and a special online kit, visit www.getyournameback.com.
Develop a new financial plan.
Whether you are part of a dual-income family, where you both work, or part of a single-income family, the thought of going it alone financially can seem pretty daunting. The first rule to live by is to NOT expect or depend on your spouse for child support or alimony when making future income considerations. Instead base all your new bills and living expenses on what you can reasonably afford on your own. Create your own budget and be sure to include divorce expenses, such as legal fees and moving expenses. Start saving what you can now by setting up your own investments. It’s also wise to review your existing investments. You may have to cut back on how much you contribute to your plan every month or establish short and long-term goals until you are more settled and comfortable with your new financial status. And if you are someone who always allowed your spouse to handle the financial side of things, keep in mind it’s never too late to learn. Do your research, demand to see all account statements, consult with a Financial Advisor and question everything. Find out firsthand from your lawyer what you are entitled to, like the equity in your home, and what you are responsible for, such as any outstanding debts. If you were cautious enough prior to your marriage to sign a prenuptial agreement, be sure to review it thoroughly with your lawyer. You may want to use it as your starting point for planning your future. All of these factors will play into your new financial lifestyle. And remember whether you signed a Prenuptial Agreement or not, you are worth more than you think!
Startling Statistic: Divorces are messy. 718,509 fortunes were lost last year in divorce court. Yet statistics show that 75% of all divorced people re-marry, half of them within three years. (Sources: www.prenuptial-agreement-info.com, www.divorcereform.org and www.remarriage.com)
Cool Hookup: If you choose to walk down the aisle again, consider protecting yourself and your family with a Prenuptial Agreement. Visit www.prenuptial-agreement-info.com for details on why you should establish one and the process involved in setting one up.
Protect your name and credit.
Most married couples have accounts, credit cards, loans, insurance policies, titles and common household bills in both of their names. This works well when you’re married, but it’s not the easiest thing to change once divorced or separated. Take every measure from the beginning to protect your good name. Find out your debts and credit history as a couple. Determine which bills have you listed as the responsible party and verify your payment history. If your spouse has been making late payments and it’s in your name, you may have difficulty moving and resuming your utility services or being approved for a mortgage, a loan or even a rental.
If you have joint accounts, beware of using money or credit cards as a way of getting even with your spouse. You may end up paying the bill in the end. Do not take out any more joint loans with your spouse. Again, you may end up paying for it entirely.
Review beneficiaries listed on all your accounts, insurance policies, retirement accounts and both of your wills. You don’t want to inherit your ex’s debt or financial troubles, and you may not want them to benefit from your wealth. In addition, protect your divorce agreement. If the divorce papers stipulate your spouse is responsible for all debts, the creditor will still pursue you in court unless you are proactive enough to remove your name from the original contracts.
Shameless Plug: Contact Avadian Credit Union today to begin the process of changing your name and address on accounts. If you’re in need of a new credit card or want to consolidate your debt to a low interest rate, consider our three types of Visa credit cards. Click here to see which one best fits you. In addition, as a Avadian member you are also eligible to apply for our TruStage™ Program, which offers discounts on auto, home and life insurance. Click here for more details.
Cool Hookup: One easy way to determine your current credit score and what accounts may still list you as an owner is to check your credit report. It’s recommended to do this once a year for your own security from fraud and identity theft. To request a free credit report, visit www.annualcreditreport.com.
Shameless Plug: Throughout your marriage, was your spouse the one who took care of paying the bills? Are you now being faced with the challenge of handling this monthly chore? If so, alleviate the stress and worry with online bill pay. It’s easy and allows you to pay your bills from the comforts of your computer. It is even equipped to set up recurring payments, so you never have to worry about being late on a payment. Click here to learn more.
Evaluate your needs and living expenses.
Throughout your divorce proceedings and the separation of property, there will probably be much discussion on who gets what…most importantly the house and the car. In the end, you may find yourself homeless and without transportation. That’s why it’s wise to evaluate your needs and living expenses from the onset. If you are willing to give over these possessions, you will need to start planning to purchase new ones for yourself. You may find renting or leasing is more of an option than owning. Or, you may be on the opposite end. You may come out of the agreement with these items and realize the house is now too big for you or the car was never your dream car. Either way, you need to really evaluate what makes the most sense financially. Research your loan and mortgage options and decide if you can handle the payments on your own or if you need to downsize.
Cool Hookup: From setting up your own budget to figuring out how soon you can pay off old debt, our financial calculators are financial tools you should be utilizing. Click here for a complete list of calculators available to help you do the math in building your new life.
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Embrace your new financial independence.
While divorce is never a pleasant experience, it does afford you the opportunity to create a fresh start. This is your chance to take control of your finances and to start thinking about you, your needs and maybe more importantly your wants. You now have the freedom to plan for your dreams without the worry of your spouse and whether or not it fits into his/her plans. For some, you may feel a huge weight of debt lifted from you. For others, you may not be so lucky, but you do have the opportunity to do something about it now. The old saying of “If you want something done right, you have to do it yourself” does have some truth behind it.
Take this opportunity to rebuild your financial portfolio. Plan for your future and don’t be afraid to ask for help. Many financial institutions offer Planning and Financial Services to discuss your current financial situation as well as advise you on possible investment options. Make sure you protect yourself and find a way to turn this experience into a positive one.
Shameless Plug: Our financial experts can assist in creating a personal financial management program you can follow in order for you to achieve your monetary objectives. For more details, click here.
Cool Hookup: It’s hard to imagine life after divorce, but inevitably you will get past all the financial, legal and emotional aspects of it. If kids are involved, click here to read five steps to help your kids open up after a divorce. For more inspiration and advice, you may want to read: “Tips to Help You Move on After Divorce” and “A Formula for Getting Back to Great!”