By Joe Gross, CDFA®
Financial crises can arise in our lives in many different ways. You could have walked away from a stream of income at some point or lost a considerable amount of money in an investment. There are ups and downs to managing your money, but some events can significantly impact your financial situation, such as divorce from a longtime spouse.
Divorce is unpleasant, to say the least. It disrupts major components in your life, including your family, time you spend with your children, where you live, and, perhaps most significantly, your finances. Managing your money during a crisis like divorce can be overwhelming, but there are ways to help you keep your finances on track.
Begin Separating Your Finances
If you suspect the end of your marriage, you should start preparing your finances as soon as possible. Begin separating your finances from your spouse’s to have a better chance of protecting your credit and building a solid foundation once you become single. At this point, you should also be thinking about any joint accounts the two of you share to ensure remaining household expenses and utilities are still taken care of. When it comes to loans or mortgages that you share with your spouse, make sure you’ve both arranged to keep payments up to date to avoid negatively impacting both of your credit scores.
Furthermore, it’s a good idea to open a bank account in your own name to set money aside to relearn the idea of managing your individual finances. It’s also important to apply for a credit card in your own name to help reestablish and rebuild your credit. The better prepared you are before the actual legal process begins, the easier it will be for your finances to recover.
Track Expenses & Avoid Big Purchases
It’s no secret that the way that people manage their money within a marriage is one of the top reasons people get divorced. If money was a stressor that motivated your divorce, you can certainly expect for it to continue to be a stressor long after you both part ways. That’s why it’s important to protect your financial future by tracking your expenses carefully. Avoid overspending and making large, unnecessary purchases, but especially on joint credit accounts. This could be perceived as “bad behavior” by a judge if your divorce ends up in court.
One of the best ways to combat unnecessary spending is by creating a budget and sticking to it. When you know your income boundaries, you can create better spending boundaries. It also goes without saying that divorce can be significantly expensive. It’s important to find a healthy balance among lawyer costs and court fees and your day-to-day living expenses. This can be difficult to deal with alone, but the best way to keep your finances under control is by reaching out to a trusted advisor who can guide you through your crisis with clarity.
Update Your Insurance, Will, & Beneficiaries
When asked what’s the most overlooked, yet most important part of money management during a divorce, I always say updating your will, trust, insurance policy, and wherever else your spouse may be named as a beneficiary. This is critical for a few different reasons.
If you forget to take care of these tiny details, they can manifest into even bigger problems. For instance, if you were to die unexpectedly but you had forgotten to change your will after divorce, your ex-spouse could be entitled to your estate, insurance policy, or any other assets you acquired over your lifetime. This can create numerous issues, especially if you have other heirs named in your will.
It’s important to reach out to your lawyer to change your will and update your life insurance beneficiaries. However, depending on the particulars of your divorce agreement, one spouse may be required to name the other as the beneficiary on a life insurance policy or for health benefits.
Divorce can be an overwhelming and stressful process. However, it helps to reach out to an advisor who understands and empathizes with your situation so you can properly transition into your new life.
Engage an Expert Wealth Management
Last but not least, you should always rely on a trusted wealth manager and financial advisor to offer quality strategies for your finances during any crisis. In fact, you may need the insight of an experienced advisor to determine if any of the above plans will be suitable for your unique circumstances.
A wealth advisor has prior experience with different scales of financial crises and, more importantly, the understanding of market intricacies. At JGP Wealth Management, we offer unbiased and expert analysis while working in synergy with legal and tax professionals to manage your portfolio.
If you’d like to partner with a financial planner who understands your unique needs and inspires you to be more confident in your financial decisions, contact Joe today at 503-446-6450 or firstname.lastname@example.org.
Joe Gross is first vice president and senior financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. With over 25 years of experience under his belt, Joe is passionate about putting his clients first and helping them stay focused on their financial goals, inspiring confidence in their future. As a Certified Divorce Financial Analyst (CDFA®), he specializes in addressing the unique financial issues of divorce. Joe is known for his tenacity to keep clients on track toward their dreams and for his attention to detail, which is second to none! His clients know that nothing will slip through the cracks when working with Joe!Joe graduated from the University of Arizona with a bachelor’s degree in finance. Outside of work, he enjoys being involved in the community and is actively involved with organizations close to his heart. Joe is a former president and current board member of the ALS Association of Oregon and Southwest Washington and a long-time member of The Multnomah Athletic Club. In his free time, he enjoys fly fishing, spending time with his family, and cheering on his alma mater, the University of Arizona. To learn more about Joe, connect with him on LinkedIn. You can also watch his latest webinar on How To Pick Up The Financial Pieces After Divorce.