Your Finances and Divorce

Aug 8, 2012 by

Aside from the mental, emotional and even physical toll that a divorce can take on a person, it can also cause tremendous financial burdens. As a result, getting the finances in order should be the first item of business for anyone considering a divorce.

It is difficult to take control of your future and make progress toward building a new single life without a good grasp of your financial obligations and assets going into a divorce. The first step in evaluating your financial position should to organize all of your financial paperwork, including all the incoming bills, all past bank statements and any important permanent records too.

After you have organized your financial documents it will be a lot easier to determine your current financial situation and will also allow you to create a budget plan for the future. Here are some steps you can take to get you started on your path to financial organization:

Organize the Bills
Don’t just leave all your bills heaped in one basket. Separate the paid bills from the unpaid and the new bills from the old. Make appropriate categories for the house payments, credit card bills, car payments, and grocery bills. All the bills should be organized, marked and stored in one handy place. Cleaning out is also a big part of cleaning up, so throw away all the stuff you are positive you will not need.

Legal Documents
Permanent legal documents are not usually bills, but your bills can become permanent legal records after they are paid, like tax returns and house payment records. You will need to keep all of your permanent legal documents like birth certificates, passports and retirement account statements separate from your bills and stored in a secure place. Just as you did with the bills, categorize and organize your legal documents so you can access them later quickly and easily.

New Budget
Once you have organized the bills you can try to create an estimate of your monthly spending based on past history. Then start keeping an ongoing record of what you actually spend each month.  By comparing your estimated costs to your actual costs you can create an accurate assessment of your monthly living expenses. The result may help show you where you might be spending more than necessary and where you can cut back.

Cut Spending
Once you examine your actual monthly spending you should be able to spot places where you can spend less. It is not usually possible to reduce fixed essential bills like house payments or groceries, but it is possible to reduce your utility bills without too much sacrifice. Turning off the lamps in rooms you aren’t using or taking shorter showers will not compromise your lifestyle too much. Many other areas of non-essential spending like restaurants, movies, entertainment, and clothes are all areas where your spending can usually be reduced almost immediately.

Reduce Outlay
Reduce the amount you pay out on your fixed monthly bills by consolidating and renegotiating if it is possible. Try to pay the bills on time to avoid incurring any extra costs in penalties. Reduce the number of credit cards you use down to one or two accounts that you get the lowest interest rates on. Pay off and terminate any credit accounts you don’t use.  Don’t forget to take a look at your mortgage too, you might be able to renegotiate and obtain a lower monthly payment.

Boost Savings Boost
By all means try to put some cash aside if you can manage it. Most people do not have enough money available to cover all unforeseen emergencies, but you must try to do the best you can in your own situation. A three month supply of cash is far better than no reserve at all. Unexpected cash expenses will always be easier to deal with if you have put a little money aside in advance.

 

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