Written by Hazel Secco, CFP ®, CDFA ®
- Equip yourself with a team of divorce professionals to best prepare yourself from financial pitfalls.
- Expenses from keeping pets, primary residence, insurance policies post-divorce can be significant. Make sure to plan accordingly to take control of your finances after divorce.
- Be thorough when budgeting post-divorce. You can never be too thorough.
- Don’t forget to consider variable aspects of some expenses.
- Talk to a financial specialist such as a divorce financial analyst to take control of financial future post-divorce. Professionals experienced with women’s finances after divorce can help you rebuild your finances after divorce with clarity and confidence.
There exists a widespread misconception regarding divorce, portraying it as a matter predominantly resolved by legal professionals such as a divorce attorney. Divorce indeed involves a legal process, where individuals file legal documents to initiate the separation. However, it’s important to recognize that divorce attorneys should not act as the sole focal point. The legal-centric perspective may contribute to the tendency to view divorce attorneys as the only go-to resource, even surpassing the roles of therapists and coaches in addressing various concerns. It’s imperative to acknowledge the multifaceted nature of divorce, extending far beyond the legal domain. While I can’t deny the fact that divorce attorneys play a vital role, it’s equally essential to recognize the significance of other divorce professionals, ensuring individuals emerge from divorce with dignity.
That said, one of many overlooked areas in divorce pertains to the transfer of expenses without taking affordability into consideration with reduced income. While asset division, child support, and alimony are commonly highlighted, the meticulous examination of expenses and their transition is frequently underestimated. This oversight underscores the importance of considering the broader financial implications of divorce.
1. Pets and Divorce
Firstly, consider pet expenses before committing yourself to keeping your pet. Whether it’s a dog or a more unusual pet, the financial commitment to their care and well-being can be remarkably high, particularly if the animals are elderly or have health conditions. Even if your pet doesn’t have health conditions at this moment, contemplate your financial obligation down the road, especially in 5 to 10 years, particularly if your pet is prone to specific health issues with old age. This aspect will most likely not be addressed by your divorce attorney; however, it should not be taken lightly. Consult with a divorce financial advisor as part of your team of divorce professionals about how to handle these expenses within your new budget post-divorce. Notably, the cost of pet health insurance tends to increase annually, posing a significant financial burden. This is especially the case as animals age. Despite the rising premiums, discontinuing the insurance is often a challenging decision to make. It’s important to consider all the factors surrounding your insurance needs and financial status. Women’s finances after divorce comes with many unique challenges so be sure to understand them thoroughly.
2. Home Maintenance
Secondly, thoroughly examine all the costs related to maintaining your primary residence; you can’t be too thorough. If you live in a condo, consider the implications of the monthly HOA fee. How much does it typically increase each year? Often, there may be lump-sum assessments to address issues when there’s insufficient funding within the condo association. Additionally, assess the age of your home. If it’s not fairly new, what are some upcoming costs associated with its maintenance? While you may feel reluctant to lose control of your home, especially when things may not seem entirely in control and if your kids are still young, it’s crucial to consider the long-term cash projections and retirement planning aspects. Property ownership can significantly impact your overall financial health if not carefully planned. While the property’s value might appreciate and you might have a low mortgage rate, it’s essential to recognize that the property is illiquid. Having a substantial amount of money tied up in a property with ongoing maintenance costs, which can become significant at times, requires careful consideration to avoid significant long-term mistakes.
3. Insurance Policy
Many people overlook the importance of examining insurance policies before finalizing a divorce settlement, especially when calculating for alimony and child support. All the insurance policies can be daunting. To list a few, there are home insurance, auto insurance, health insurance, etc. Health insurance can be especially daunting if you were not working during the marriage or took a break from your career for family reasons. Learning about potential options for health insurance coverage during the 60 days is crucial, as dealing with health insurance and covering expenses out of pocket can pose a significant burden.
It’s not surprising to see so many people overlook all the details of each insurance policy’s premium and intricate details about how the premiums might change, as they are usually not even fully aware of their coverage. It’s crucial to consider how these policies may change or if premiums might increase significantly at a later date, information that may not be initially apparent.
For some policies like auto insurance, situations can often evolve. For instance, if your child needs to get a car, adding them to your insurance could become a necessity. There are numerous variables to consider to understand how those premiums and insurance policies will impact your financial life post-divorce and careful examination of insurance policies is a vital part of this process.
Tips for Navigating Divorce Finances
Navigating divorce finances can be overwhelming, but with the right mindset and strategies, you can make the process more manageable. Here are some helpful tips to guide you through this challenging time:
- Educate Yourself: Take the time to educate yourself about divorce finances, including legal requirements, tax implications, and property division. The more you understand, the better equipped you’ll be to make informed decisions. You can find more relevant blog posts here.
- Seek Professional Advice: Don’t hesitate to seek advice from professionals such as divorce attorneys, divorce financial planners, and therapists. They can provide valuable guidance tailored to your unique situation.
- Communicate Openly: Effective communication with your soon-to-be-ex-spouse is essential during divorce proceedings. Discuss financial matters openly and honestly to reach mutually beneficial agreements.
- Prioritize Your Financial Future: Focus on your long-term financial goals and make decisions that align with them. Avoid making impulsive or emotionally driven choices that could have a detrimental impact on your financial future.
- Take Care of Yourself: Divorce is a stressful process, so it’s essential to prioritize self-care. Seek support from friends, family, or support groups to help you navigate the emotional challenges that arise.
Final Thoughts: Taking Control of Women’s Finances After Divorce
Knowing all the ins and outs of post-divorce expenses will help you take control of your financial future. The challenge with these expenses is that they can be variable, and you might underestimate them, leading to more liability than expected, which can become a significant financial burden. Not being aware of these expenses can derail your post-divorce financial situation. Therefore, take control of your financial future by consulting with a Certified Divorce Financial Analyst (CDFA) during and after the divorce process.
Feel free to reach out to us; we’re dedicated to assisting women in transition and post-transition as women’s finances after divorce pose unique challenges. Empower yourself with knowledge, and you deserve to make informed decisions for your new life.
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Securities and advisory services offered through LPL Financial, A Registered Investment Advisor. Member FINRA/SIPC.