January is one of the most popular times to start a divorce or separation. It is a time of reflection, new beginnings, and big decisions. But avoid rushing the process — start by preparing your finances.
Getting your financial affairs in order before starting a separation or divorce can protect you and prevent complications in the future.
Start with the good news
Find out where all of your money is and how much you have. If you're not the partner who handles the family finances, do some research. If you are the family financial lead, update your records and look up the latest balances. Locate insurance policies, retirement account statements, and titles to homes, cars, and other property. Gather bank and credit card statements, tax returns, W-2's, pay stubs, and 1099's to better understand your family's finances.
Face the ugly truth
Debt can be scary but getting a clear picture of how much you have taken on can help you overcome fear of the unknown. The first step in tackling a problem is knowing how big it is. Gather your credit card and home loan statements. Do you have a second mortgage or a line of credit? Don't forget those. If you have outstanding medical bills, car payments, or quarterly taxes, all of these should be included in your big picture.
Understand your budget
Keep track of monthly expenses, or use past records to create a monthly budget. Include fixed expenses such as mortgage and car payments, and fluctuating costs like utilities, groceries, and discretionary spending. Can you sustain this level of spending after your household splits into two? If not, you may have to consider significant changes to your lifestyle.
Know where you stand
Now that you know where you are with your assets, debts, and monthly spending, you can begin to plan for your future. You can make an educated guess as to how far your single income will go or how much child or spousal support you will need. This is the time to improve your financial future if necessary. Go back to school, negotiate a raise, or look for a better-paying job. You can start working on reducing your debt, which might include negotiating with credit card companies or increasing loan principal payments. Consider whether you will need to sell your house or car and divide the proceeds with your spouse.
Begin to separate your finances
You can only control your own actions, so protect yourself from your partner's possible missteps by removing your name from shared accounts. If your separation will be amicable, now is the time to establish separate accounts and start handling household finances like business partners. There will be bumps in the road, but if you navigate it together with the family's well-being in mind, your efforts now will make life easier post-divorce.
If you need help navigating through the complexities of divorce, contact our seasoned family law attorneys at Norman Dowler LLP. We specialize in family law in Ventura, Santa Barbara, and Los Angeles Counties.