Finance

Financial Planning in Divorce: Take Control Of Your Finances

Are you able to access your Social Security Report details and credit score? Do you have the title to your house, mortgage and life insurance policies? Can you locate the deed to the car, mortgage and car titles, as well as the tax returns for the last 5 years, bank statements, and brokerage statements for the year? Are you able to find out how much your spouse makes or how much goes into a 401k each year?

Divorce is often a wake-up call for those who want to know more about their family finances.

Management of your finances does not involve knowing which bond, stock or mutual fund you should buy. It is about knowing your assets (assets), what you owe and what’s coming in to you (income). It’s about being organized and paying attention to where your money goes.

You will be required to produce lots of financial paperwork and documentation to the court, your lawyer or mediator, and for your soon to be ex spouse. So, let’s get started:

Take out a space and collect all statements, bank, brokerage, credit card, etc. You will also need paper, pencil, hole punch and index dividers.

First, let’s calculate your net worth. This is the difference between what you have and what you owe. Make a list, including everything you own, such as house, car and brokerage accounts. Also, make a list about all of your retirement accounts. The internet can help – check out zillo.com and KBB.com. Next, list all outstanding debts, including mortgage, car loan and credit card debt. This information should be kept in the first section your 3 Ring Binder.

Next, you need to determine where your money is heading (the cash flow). Or the truth of not knowing where all that money went. A computer program such as Quicken or QuickBooks is the best way to calculate your cash flow. Mint.com is a useful website. You can use Excel, columns on lined or graph paper if you don’t want to use the computer.

Make a budget by gathering your checkbooks, stubs, and statements from charge cards. You should assign each expense a category as well as a subcategory. For example, enter the monthly expenses for Utilities. You’ll get both a total for each category and a total across the whole Utilities category. Do not forget to include your income from child support, alimony, and other sources. Print a report each month and a quarterly one every three months. These should be kept in your cash flow or budget section.

While it might take several months for you to see your income and expenses, it will provide the foundation for your financial management and negotiation of child support or alimony.

You can control your spending and reduce expenses if you have a good handle on your cash flow. Consider saving 10% of your income. Next, you should rework your expenses in order to determine if it is still feasible. Save as much money as you can.

• Get out of debt – pay down credit cards and loans
• Have an emergency fund not invested in the stock market. At least three months’ worth of household expenses should be saved. As much as possible, keep an additional 3 month in a cash market or short term CD.
• Take advantage of retirement plans

This information should be placed in the Savings Goal section.

With this information, you can consult with a Certified Divorce Finance Analyst early in the process to help you face the challenges of divorcing with more confidence.

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