If you’re going through a divorce, you’re aware of how a divorce can impact your finances tremendously. Given the fact that California is a community property state, many Californians stand to lose half of their hard-earned assets, if not more.
We’re talking about equity in the marital home, retirement accounts, cash in bank accounts and investments. Not only that, but divorced spouses see their income drop while their expenses seem to increase dramatically.
Whether you were the breadwinner who is now paying child support and spousal support, or a former stay-at-home parent who had to re-enter the workforce and put your children in full-time childcare, divorce can turn people’s lives upside-down.
Here are some steps that you can start taking today that will help you rebuild your financial health following a divorce.
1. Get out of the dark.
If you don’t know how much income you have coming in and where every dollar goes, you want to get out of the dark. Knowledge is power and the sooner you have a grasp of your full financial picture, the sooner you can start taking measures to improve it.
Sit down and figure out how much income you have coming in from all sources each month. Then, write down exactly what all of your weekly and monthly expenses are. On your list, include what you spend on gas, groceries, dining out, clothes, and miscellaneous expenses each week.
Once you have created a comprehensive list of your expenses, see if you need to cut back anywhere. Perhaps you don’t need to spend $25.00 a week at the Coffee Bean, or maybe you can bring your lunch to work instead of eating out Monday through Friday.
If you cannot afford your post-divorce expenses, you may need to move into a smaller home, trade in your car for a less expensive model, or find ways to increase your income.
2. Check your credit report.
During and after divorce, it’s critical to stay on top of your credit. You can get a free copy of your credit report once a year from the three bureaus. You should have closed any joint accounts before the divorce was finalized. Otherwise, keep a close eye on any joint accounts that your ex is paying.
3. Check your beneficiary designations.
After a divorce, it’s important to be sure that your beneficiary designations are set up correctly. If you fail to update the beneficiary designations on your life insurance, retirement accounts, or bank accounts and something happens to you, your ex-spouse could receive that money – probably not what you would have intended.
4. Reorganize your life.
After preparing a post-divorce budget, did you discover that you cannot sustain your current lifestyle? If so, you need to reorganize your life so you don’t end up having to file for bankruptcy.
Do you need to go back to school or work? Do you need to downsize into an apartment or a condo? Do you need to cut out that expensive gym membership? Make a list of everything that has to be done and start taking action on it.
If you’re in a high-net-worth marriage, your finances are more complicated than most people’s. Be sure to assemble a qualified divorce team, which may include a financial advisor and a tax professional.
Need a Los Angeles divorce lawyer? Reach out to Claery & Hammond, LLP today.