There is no doubt that getting a divorce is one of the most emotionally stressful experiences someone can endure. However, it is also one of the most financially stressful.
Divorce itself can be expensive and spouses must divide their finances and assets equitably. This is why it can be incredibly beneficial for individuals to prepare their finances for their divorce and their future.
The divorce process has some built–in financial planning
The primary goal of a divorce is not only to end a marriage but also end the economic partnership that marriage creates. The goal is to help spouses maintain the same lifestyle, comfort level and accommodations that they experienced during the marriage. Therefore, a significant amount of energy in a divorce is focused on:
- Asset division: North Carolina law requires spouses to divide their marital assets equitably. The factors considered in the property division process help both spouses to ensure their financial needs are met.
- Support payments: After dividing financial assets, including income, both spouses will likely have fewer assets. Divorce settlement agreements also often include support agreements. Both child support and spousal support help provide financial assistance based on the spouse’s or the child’s needs.
Even with this built-in financial preparation in the divorce process, individuals should still take stock of their finances before their divorce.
An individual plan is essential too
Creating a financial plan for divorce can be a key factor in helping individuals prepare for life after divorce. It can help to understand and calculate certain details, including:
- Calculating how the 2018 tax changes to alimony could affect their finances;
- Planning an effective budget to help rebuild finances during and after the divorce;
- Taking an inventory of what assets and debts they will have after property division;
- Calculating how debts will impact their budget and income; and
- Considering what they will need to meet their financial needs, as well as their family’s needs.
A divorce might provide new financial opportunities, including more control over the budget and financial priorities. On the other hand, it might be difficult for others to get back on their feet after a divorce.
Regardless, preparing a financial plan can help individuals manage their finances and reduce some of the uncertainty that a divorce can bring for the future.