There is no denying that divorce is painful and difficult. A family is an emotional and financial unit, and its dissolution weighs heavily on everyone involved. From a personal finance perspective, here are a few steps you can take to limit the damage to your accounts, as you go through this trying period.
• Cut your spending down to basics. During and after a divorce, it’s very likely that you’ll be living on a smaller income, and that you’ll have increased expenses. You’ll need a separate place to live, and you’re going to need new household items that you previously shared. You’ll have legal expenses as well.
•Try to limit your spending as much as possible. Alimony and child support may come into play, but in either case, it’s best to build up the resources you have from this moment forward. Spending less and saving more will give you more room to independently manage your future and your children’s future for the long term.
•Understand as much as you can about your financial situation. It’s important to know as much as possible about your family’s assets and debt. That knowledge will ensure a fair division of your property and debt, and help you manage your portion of those finances autonomously.
Review the accounts you have in your name, as well accounts you share with your spouse. Put together a clear picture of what you both own and owe, as well as your personal pre-marriage assets and debt. Make sure you understand the terms and conditions behind each financial contract you have.
Compile a list of the different financial and legal contracts that tie you together, including your health insurance, life insurance, wills, retirement accounts in which you name your spouse as the beneficiary, etc. These are contracts that will need to be updated to reflect your new situation.
•Put together your own budget and bill payment schedule. You’ll have greater control over your own finances if you have a good system in place to help you along. An organized budget will help you keep your spending below your income, and your payment schedule will ensure that you pay on time, and avoid any unnecessary damage to your credit score.
•Close your joint credit card accounts. When you and your spouse have a joint credit card, you not only share debt; you also share a credit record. Closing joint accounts and opening individual accounts ensures that neither you or your spouse are liable for the future actions of the other on that account.
If you are carrying a balance on that account, and you’re still on amicable terms with your spouse, talk to him or her about it. If you can both agree on splitting the debt equitably, transfer your portion of the balance into an individual credit card or a debt consolidation loan, and make sure your spouse does the same. Then, close the joint credit card.
•Seek financial and legal help. There are plenty of resources to help you, whether you have questions about your financial situation or family law. Feel free to ask questions at your financial institution, or call the Guam Bar Association if you need legal help. The more clarity and control you have, the stronger you’ll be in weathering the storm.
Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.