If you’ve been through a divorce, you know how difficult it can be to try to sustain two households on the same income. If you’ve never been divorced, you’ve still heard the horror stories about wrecked finances. It’s enough to make you wonder if it’s even possible to get through a divorce without taking a big financial hit.
If you are contemplating divorce and are not sure about what kind of impact it may have on your finances, here are five common ways divorce impacts you financially:
Budget. Before divorce, there was one household to support with your current income; after divorce, there will be two households to support. It will be helpful to you if you can develop a new budget for each so you can determine what kind of changes will need to be made to accommodate your new normal.
Children. If you have children, there will be child support and you will either be paying or receiving it. If you are paying, working with your lawyer is essential to determine a settlement that will allow you to support yourself and your children. Consider the risks to your plan as well — i.e., if your ex fails to pay or seeks court-ordered changes due to a job loss or health problems.
Assets. New Jersey is an equitable distribution state, requiring that all marital property is divided fairly — which does not necessarily mean divided equally. If possible, it’s best if you and your spouse can come to an agreement on how your property will be divided rather than letting a judge decide. Be sure you work with your lawyer and financial advisor on asset protection strategies, but be prepared to compromise. Also, don’t give in to temptation to cash in retirement accounts early, as this can trigger taxes and penalties.
Debt. In addition to asset division, your divorce settlement will also address debt obligations. Check your credit report to get a full accounting of your debt responsibilities, both individual and joint, and be sure your spouse does the same. You don’t want to be held responsible for any debt racked up while you were married that you didn’t know about.
Savings. When you divorce, you need to revisit your savings plans for things like retirement, college, and health care. You will probably need to adjust these to your new financial reality, so consulting with your financial advisor will be key to making good decisions about saving for your long-term needs.
When you are faced with an important life decision regarding a key family relationship, the advice and assistance of an experienced family law attorney often proves crucial to your understanding of the issues involved and your satisfaction with the ultimate outcome of your family law matter. Contact us today for your free consultation.
