Filing for divorce is a big life decision that has a significant impact on your emotional and social well-being. Divorce is also a huge financial decision because it can have a considerable impact on your financial future. If your spouse has been handling all the family finances and your financial skills are stale, divorce can create an especially challenging situation.
If you’re feeling overwhelmed when it comes to your divorce finances, a checklist can be a helpful tool and starting point. By providing structure, organization, and clarity, checklists help you stay focused and work toward better outcomes. In this article, Boulay’s lead divorce financial advisor, Corey O’Connell, provides a financial readiness checklist to help you prepare to improve your financial well-being after divorce.
1. Figure out your current net worth
In a divorce, assets such as property, investments, and retirement accounts are typically divided between the spouses. This can have a major impact on your net worth and long-term financial stability. Therefore, the starting point for one of the most important divorce processes—the division of marital property—is understanding your current financial position.
Start by considering what you own, as well as what you owe. Some assets and liabilities are straightforward—such as the marital home and corresponding mortgage, bank accounts, retirement accounts, credit card balances and student loan balances. Other items are less obvious, but are important to include, nonetheless. For example, document any life insurance policies (including employer policies and those with cash values) and make sure you know the estimated value and location of any significant artwork, jewelry, bullion, or cryptocurrencies.
All of these assets and liabilities will eventually be listed on the marital balance sheet. The marital balance sheet is a financial document that serves as a snapshot of the married couple’s financial situation. This will be used in the property division process.
2. Know your current income and budget
In addition to knowing what is owned and owed, it’s essential that you gather any documentation that supports your income and spending habits. Knowing your family’s income and spending habits will be key factors in determining the amount of any child support and spousal maintenance payments. This includes:
- Paystubs from your employer. Paystubs are an important document that provide information about your income, including base pay, overtime, commissions, bonuses, etc.
- Tax returns for the past few years. Your tax returns provide a detailed look at your income and deductions, along with certain types of expenses over the past few years.
- Bank and credit card statements. These documents show your transactions and expenses for the past few months.
- Bills and receipts. Keep track of your bills and receipts for all your expenses, including rent/mortgage, utilities, groceries, clothing, entertainment, and other expenses.
- Investment account statements. If you have investment accounts, review your statements for any significant withdrawal or investing activity.
By gathering and reviewing these documents, you can get a comprehensive picture of your income and spending habits.
3. Hire experienced professionals
While a qualified support team is an upfront cost, it can save you time, money, and stress in the long run. When you start the divorce process, a skilled attorney is an obvious first hire. You may also find that many other professionals—divorce coaches, parenting experts, mortgage brokers, real estate appraisers, etc.—can provide invaluable advice.
In addition to these professionals, an experienced divorce financial advisor can be an asset to your team. Leveraging deep expertise in accounting, taxation, and finance, a divorce financial advisor provides critical financial guidance throughout the divorce process. By working in partnership with your legal team and other advisors, a divorce financial advisor helps ensure your interests are protected and your needs are addressed—setting you up for financial security in your life after divorce.
Divorce is challenging no matter the circumstances, but the right professionals can lighten the burden and set you up for post-divorce success. If you don’t know where to start, your divorce financial advisor can provide referrals to other trusted professionals. Connect with Boulay’s divorce financial services leader, Corey O’Connell, to learn more.
4. Seek financial guidance for the future
While many of the steps on this checklist focus on preparation for divorce, if you find yourself in a situation where you need to take control of your finances after a divorce or separation, know that you are not alone.
Ask your divorce financial advisor to refer you to a trusted financial planner, such as a member of the Boulay Financial Advisors, LLC team. Explains Ellen Horan, Wealth Management Partner, “A key part of a financial planner’s job is to advise clients through major life changes. They help you adjust your financial plan to fit your new circumstances, set up an appropriate post-divorce budget, and implement financial strategies that help you maximize your wealth and achieve financial security in your next chapter of life.”
Helping You Get There…
Preparing financially for your divorce is no small feat. However, taking it step-by-step makes the financial preparation more manageable. Download this checklist to use as a starting point for divorce financial readiness. Then, connect with Corey O’Connell, a trusted divorce financial advisor, and learn how we can help.