No matter who you are, divorce is an incredibly upsetting and often disruptive and destructive life experience to have to go through. Depending on your situation, there may be so many different facets to your split that it can seem more than a little overwhelming.
While most people going through a divorce are quick to hire an attorney, many of them don’t realize that a financial advisor is just as vital. Even if you don’t have what you believe to be a considerable nest egg, an advisor will help make sure that the split doesn’t devastate your finances or leave you in a sinking pit of insolvency.
The fact is that while most divorce lawyers can handle financial dealings, they are not equipped to provide sound financial advice. Your attorney is there to represent you to the court and fight for your legal rights – not to protect your financial future. Thus, it’s imperative that you seek the counsel of an advisor as soon as possible.
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So, with that in mind, here are some things to consider when thinking about your money and how the divorce will impact it. No matter which side you’re on, financial planning is crucial if you want to minimize the damage of your separation.
Find an Advisor ASAP
Yes, your first call should be to your lawyer, but the next one should be to your financial advisor. The sooner that you can bring someone on to your case, the better off you’ll be, both during and after the divorce.
The fact is that there are a lot of details that have to be considered when splitting things like assets, so having a financial professional on your side will alleviate the pressure of having to figure it out yourself.
The worst mistake you can make is waiting until after the divorce is finalized to get an advisor. You need to make sure that you’re financially solvent immediately, so you can’t afford to wait a few weeks while your advisor gets up to speed. Not only that, but your counsel can provide insight into your situation and advice on the best way to proceed.
Get Your Own Advisor
Chances are that you and your soon-to-be-ex-spouse had one advisor helping the both of you. Now is not the time to use that person. While that advisor is probably more than qualified to help, the issue is a conflict of interest. Because he or she knows you and your spouse, there’s no guarantee that the advisor can be objective.
Also, working with the same advisor can lead to unintentional mistakes. For example, let’s say that your spouse took out a home loan on your house to pay for an investment and didn’t tell you about it (but told your advisor). If your advisor assumes that you know about it, he or she may not disclose the details, thinking that you’re apprised of the situation. Then, afterward, you discover that you owe more on the property than you thought. In this case, the mistake wasn’t intentional, but it will cost you in the long run.
Overall, you want to find new counsel that is not only fresh to the situation but is only concerned with your finances, not your spouse’s.
Don’t Rush Your Financial Plan
Just because divorce can be ugly doesn’t mean that you want to rush through it. Even if your circumstances are such that a speedy process is beneficial, you want to take the time to do things right. After all, a mistake now could cost you massive amounts of money later on.
Instead, give your advisor time to figure out your situation so that you can determine the best strategy for after the divorce. There are a lot of different elements to consider when building your financial future post-split, so you have to make sure that all of the details are right before proceeding.
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What to Think About for After the Divorce
While each situation is different, here are some things to consider when talking to your advisor about how life will be like after the split.
Removing Your Spouse From Assets
Do you have a life insurance policy with your spouse on it? What about any assets? After the divorce, you need to make sure that your ex is no longer your beneficiary. Not only do you want to amend things like life insurance plans, but also your will. Your lawyer can help you do this as well, but your advisor will provide some extra insight into this situation.
Adjusting Your Budget
One aspect of living with a spouse is that your expenses are usually higher, as well as your income. Thus, after the divorce, you have to be sure that you can afford to maintain your current lifestyle. If not, then now is the time to figure out how to adjust your budgets so that you don’t get into massive debt.
Speaking of debt, if you are going to amass debt because of the divorce, you need to include that in your financial plan as well.
In some cases, you may get money out of the split. If that happens, you want to make sure that you use it properly. Investing your settlement is an excellent way to plan for the future and ensure that your financial situation will stay stable for a while. Talk to your advisor about potential investments and what you can do with that money so that it benefits you the most over the long term.
Bottom Line – Financial Planning is Crucial for Your Divorce
Regardless of your situation, you need to make sure that your split isn’t going to saddle you with massive debt or financial instability. Talking with an advisor now is going to alleviate a lot of the stress that comes from a divorce, and it will help you get onto the right path once things have been finalized.
Overall, leave the legal proceedings to your lawyer, and leave your finances to your advisor.