What You Need To Know About Finances and Divorce

A divorce process is one of the most stressful, overwhelming experiences you will face in your lifetime. It's hard enough dealing with the present without deciding your financial future by choosing one property settlement over another, but you must be practical.

If you have very few possessions and no children as a result of the marriage the process may be very simple: "You get the kettle and I keep the crock pot", but when children are involved and/or there are considerable assets accumulated throughout the life span of a marriage, many financial decisions must be made that not only take care of immediate family needs, but retirement needs as well.

You should develop detailed monthly household budgets to help avoid post-divorce financial struggles. Prepare yourself with the facts to insure that your finances and your divorce is compatible with a lifestyle that will support both partners.

Gather your financial information as if you were preparing to see a tax advisor or financial planner. Record what assets you have, debts you owe, how much income you have, and how much you spend on a monthly basis. This will help you project you finances into the future. Think about what you want to do when you are divorced. Do you want to stay in your home? Will you go back to school, train for a new job, or is it time to start your own business?

The answers to these questions will have a cost, if not immediately then sometime in the future. Spend time contemplating how you see yourself 10, 15 and 20 years from now. Discover what is truly important when you look at the long-term consequences of your finances and your divorce.

Make sure you can live on the support you will be receiving or what you have to live on after paying support. Do not just accept, "He keeps his pension and she keeps the house", since that leaves her without a retirement income and him without a home.

Also, the impact of taxes can have far reaching implications on all your decisions. Divorce usually involves a tax-free exchange of assets, but taxes affect alimony, child support,capital gains and more. It is very important to consult with a tax advisor before accepting a settlement. The decisions you make now about your finances and divorce may affect you for the rest of your life.

Be honest with your spouse. Do not hide money, over-estimate the value of your property or underestimate the worth of your pension. That will only delay the progress of the divorce and makes it more costly.

Expenses such as life insurance, health insurance and educating any children, as well as the cost of living increases should be projected into the future and taken into consideration when agreeing on a final financial settlement as well. Many people have false expectations that they will be able to secure a divorce that allows them to continue with their accustomed style of living. Statistics have shown that this is not always possible.

To avoid long-term financial pitfalls related to your finances and divorce agreements, both partners should have a pre-planned financial schedule that they can come to an agreement on. With that they can forecast the long-term financial effects of the divorce settlement.

It is far better to develop a long-term forecast for a financial situation than a short-term snapshot. Don't fall into the trap of thinking, "I just want out". Both spouses assumed responsibilities during a marriage and those responsibilities do not necessarily end when the marriage does. Being prepared can alleviate a great amount of financial stress for you and your family in the future.

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