The money-smart divorce
Divorce is often not only emotionally difficult, but financially devastating – even if young kids are not involved. There are, however, steps you can take to mitigate the damage.
Before the divorce
If you’re considering divorce but haven’t yet separated there are steps you can take to protect your financial present and future. First, start to gather your financial information – find records of retirement savings, other assets, and debts. Not only will this information be required by the courts, it will also help you as a tool to plan your moves.
Get a copy of your credit report to see where you stand, and if you haven’t established a credit record in your own name, take out a small loan or sign up for a department store credit card. Make payments on time with both.
It’s also a good time to be realistic about your post-divorce budget. Look at your current income – are you working, or dependent on a spouse’s salary? What about post-retirement income? Don’t assume that you will be awarded spousal support, at least not indefinitely. Although the courts in Canada do attempt to relieve economic suffering of either spouse due to marital breakdown, they also award spousal support with the intention to promote self-sufficiency. If you need to polish your resume to try for a promotion or go back to school to gain some skills, this might be the time.
You will also want to open an account in your own name and begin to build some savings for moving and emergency expenses, etc.
It’s also a good idea to consult with a family law lawyer. He or she will be able to tell you whether you need a lawyer going forward and can bring issues to your attention that you will need to consider. If your divorce is a simple, uncontested one, you may be able to file the documents yourself.
Make sure you separate responsibly
It’s important to close joint accounts once you begin to separate households. Issues with these accounts can continue to haunt you for years after a divorce.
In Canada separation agreements are often used as a basis for a divorce settlement, so you must take them seriously before you sign. Don’t agree to less spousal support or more of the shared debt than you would be willing to accept over the long run. If you haven’t consulted with a lawyer yet, it might be a good idea to have the agreement reviewed by one.
Keep fighting to a minimum
If your divorce is a fairly straightforward one, however, you may want to consider bypassing the traditional adversarial relationship. It can be a truism that the only people who get rich through divorce are lawyers. Mediation can be a faster way to come to agreement on core issues. And whether you go into mediation or into court – remember that a contentious divorce will cost you more. If it’s at all possible to let your emotional issues drop and look at the financial picture with a clear head, it will probably save you time, effort, and money to do so.
Consider the post-divorce picture
When you are dividing assets, keep your post-divorce financial picture in mind. A common mistake is to fight for possession of the family home – and giving up other assets, such as retirement savings. Consider whether you can maintain the home on a single income. If you can’t it may be better to let your ex-spouse have it – or sell and divide the proceeds with other assets.
Divorce is difficult at the best of times but it doesn’t have to spell financial ruin. Many individuals end up with a clearer view of their finances, and a better sense of their priorities, after a divorce. Use financial information to your advantage and you may find your new lifestyle truly an enjoyable one.