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A comprehensive resource for information and support before, during and after divorce.

Top Ten Divorce Tips

1.    Copy Your Records Before your divorce, be sure to make copies of all of your financial records.  Keep them in a safe place away from your spouse.  These records include, but are not limited to, personal and business income tax returns (last three years), business records, account statements from investment firms, banks, and pension offices, pay stubs, life insurance information, annuities, credit card statements, stock certificates, and receipts for purchase of larger items.  Copy anything to which you might need to refer.  Obtaining copies of records via the discovery process while in the midst of a divorce is much more difficult and can be expensive. (Wendy W. Spencer is a CFP®, and CDFA™ in the Denver, CO area.) 2.    Obtain Copies of Credit Applications Obtain copies of any credit or mortgage applications from your bank or creditors, particularly those that have been completed 12 months prior to your separation.  If the application was joint, then it will list assets, liabilities, and income for both spouses.  Those applying for loans or credit tend to list all possible assets and income in order to qualify for the credit.  As a result, this may be a very good source of asset discovery when one spouse believes that the other is withholding information on marital property. (Karen Odom is a CPA, CDFA in High Point, NC.) 3.    Identity Check Verifying accurate personal, financial, and business information is critical to maintaining your identity.  It’s important to check data reporting services, such as credit agencies, as well as banks and investment/insurance companies, to ensure that your name, address, and other personal information are correct.  Google yourself!  Find out what information, if any, about you is on the Web.  You can contact the Webmaster for sites where you find inaccurate information.  Contact your local post office and utilities as soon as you or your (ex) spouse plan to move to provide a forwarding address and to ensure that you continue to receive your mail. (Maureen D. Hale is a CDFA based in Chicago, IL.) 4.    Marital Debt Debts that were obtained in the name of both spouses before a divorce (meaning both husband and wife signed a document or application saying that they were responsible for the debt) remain the obligations of both parties after a divorce, no matter what a divorce decree says.  Creditors are not party to your separation or property settlement agreement.  Therefore, if your ex-spouse does not pay a debt that he or she was responsible for according to your divorce decree, then YOU are responsible for the debt. (Todd Curry is a CDFA(tm) in Charlotte, NC.) 5.    Cancel “Joint” Lines of Credit If your divorce...

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How to prepare yourself to deal with the financial realities of divorce

More often than not, the standard of living of both spouses drops in the first few years after divorce. Why? Because the same cumulative income and pool of assets now has to support two households instead of one. Unfortunately, most people don’t prepare themselves financially or emotionally for that consequence. So what can you do to better prepare yourself for this inevitability? The answer is simple, but it’s not easy to put into practice. Divorce is an inherently stressful process. To alleviate some of the stress, it’s important to be proactive and in control. Here are the “Lucky Seven” things you can do to help prepare yourself for your post-divorce financial future. 1. Expect your income to drop after the divorce is final. You should expect your income to drop after the divorce is final. Develop a budget based on needs– not wants – and keep in mind that your expenses need to stay within your post-divorce income. Consider all sources of income – including spousal and child support, keeping in mind that they won’t last forever – as well as investment income. To develop a budget, use a detailed worksheet so you don’t overlook any expenses. The best source for the expense information is your check register, if that’s how you pay your bills. Remember that not all your expenses are paid monthly; some insurance premiums or tax bills might be payable quarterly or annually, so make sure to account for those as well. (To help get you started, fill out the “Monthly/Annual Expenses” worksheet, which is available online at www.institutedfa.com.) The last step in preparing a budget is to ask a reasonable and critical friend or family member to review your budget and challenge the expenses that seem unreasonable. You have to agree to keep an open mind and not to get mad if he/she challenges one of your items; remember that this person is trying to help you. 2. Consider whether you can afford to keep the house. Here are the traditional options for the matrimonial home: One spouse stays in the house (with the children, if any) and buys the other spouse’s share by: Cash-out refinance Giving up another asset Property settlement note The spouses sell the house during or after the divorce process and split the proceeds. In many cases, one spouse – usually the wife – wants to keep the house. Though this might be emotionally satisfying, it usually makes little or no financial sense. The equity in the house is illiquid, meaning it won’t pay the bills. In today’s housing market, sometimes the matrimonial home can’t be sold in a reasonable amount of time – or for a reasonable amount of money....

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Avoiding Financial Disaster

Marriage is about love, but divorce is about money… Here are some tips to help you avoid making disastrous mistakes during your divorce. Many couples face financial uncertainty after they divorce. This is often the result of using the same income to pay expenses to operate two households instead of one. For instance, you’re now faced with two mortgage or rent payments; utilities, furniture, appliances, and supplies for two homes… The expenses add up. If only one ex-spouse works outside of the home, then he or she may have to pay both spousal and child support, which will negatively affect the payor’s cash flow. If both spouses work outside of the home, then each would have only a portion of their combined income to use to pay for their individual household expenses. Separation or divorce is a time when both of you should reduce your spending and make an effort to live within your individual means. For instance, if you’re not working, can you really afford the country-club dues or fresh flowers every week? One common pitfall is considering the assets that you receive as part of the property settlement as an additional source of income. Instead of using these assets to pay for current expenses, they should be maintained for emergencies, retirement, creating new sources of income, and other long-term financial goals. This does not mean that you should never touch these assets: it’s one thing to use them to pay for tuition to improve your job skills, but quite another to deplete them to purchase a brand-new SUV. Before you dip into these assets, ask yourself whether the expenditure is going to create income for you in the future, or whether it’s a frivolous purchase you’re going to regret when the bill comes due. Let’s take a look at an example of how failing to create and stick to a realistic budget post-divorce could affect your future. The Grasshopper and the Ant, Post-Divorce Consider the cases of Lisa and Teri: two sisters who married men with very different careers. Lisa’s husband became a wealthy stockbroker, while Teri’s husband worked at the local GM plant. Eventually, both couples divorced. Lisa was awarded five years of alimony at $75,000 per year, half of her husband’s retirement account ($300,000), and the million-dollar family home. Lisa was not used to living on a budget of $150,000 a year, and she wanted to preserve her image as a successful woman. For her, that meant country-club fees, $25,000 a year on clothes, vacations in Palm Springs, lavish parties, summers in Europe, and keeping the family home. Her alimony did not come close to covering her expenses, but she dipped into her retirement account...

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