No matter how amicable (or not) a split your divorce is shaping up to be, it’s completely normal to be concerned with how best to safeguard your financial future as you move forward into your new life. How do you go about protecting your finances during a separation or divorce? Here are six basic steps:
1. Close All Joint Accounts
As soon as you can, close any joint credit card accounts you have with your spouse, including lines of credit with a bank (i.e., home equity credit loans). If you have a debt balance with a credit card and they refuse to close the account until the balance is paid, send the creditor a letter explaining your situation and informing them that you will not be responsible for any further debt incurred on the card.
2. Open Your Own Bank Account
Raiding joint checking and savings accounts is a surefire way to turn your divorce into a fight, and can affect how much you are able to walk away with in your settlement. Instead, open up your own bank account and begin depositing all paychecks and other forms of income here. If you and your spouse can’t reach an agreement to split the money in your joint accounts, negotiations over this money can take place during the divorce.
3. Establish Your Own Line of Credit
As with taking control by establishing your own bank accounts, take the extra step to also establish a separate line of credit under your name only. Since credit can take a hit in divorce if problems arise with paying off jointly held accounts, this is one smart way to keep your credit intact.
4. Run a Credit Report & Consider Credit Monitoring
After a bill goes unpaid, it can sometimes take negative credit items months to appear on a credit report. It’s a wise idea to run a credit report at the outset of your divorce to see where you stand, but also consider signing up for a low-cost credit monitoring service. Having such a service puts you in a stronger position to see items pop up on your credit report as they happen. Could it be that your spouse has access to a joint credit card that you were never aware existed? If it has been faithfully paid (or has remained unused), it may not show up on your credit report until there is an unpaid/delinquent balance.
5. Protect Mutual Assets
Like most couples, your home is probably your most valuable joint asset. If you have moved out of the home as part of your marital separation, keep in mind that it is in your best interest to make sure routine home maintenance continues. When you sell the house or are relieved of your ownership of the home (through a buyout or other settlement measure), you will be happy that you kept this asset in tip-top shape. Are you the spouse still residing in the family home? Avoid the temptation, whether motivated by anger or frustration, to do anything intentionally destructive or neglectful to the house. Is the basement flooding or the roof leaking? Let your spouse know and come up with a plan to share costs for fixing any problems.
6. Move Personal Valuables to a Safe Location
Do you own valuable jewelry that you inherited from your great aunt? Do you have an art collection, or have any personal items that are of sentimental value? If you have any concern about keeping separate property secure, consider moving to a storage unit, bank security box, or leaving at a friend’s house. Make a list of all items removed from the house and share this list with your attorney. What you don’t want is to be accused of hiding assets, so make sure to carefully consider whether your spouse has any claim to an item, and be upfront with him/her as to what you are doing.
7. Identify Sources of Cash
As you go about shoring up your finances for the months and years ahead, it brings peace of mind to understand where you might be able to access money should cash be needed on short notice. Think about exploring loan programs offered through a credit union or other program in your workplace, or talking to a loan officer at your bank as to what personal loan programs you might quality for.
Making smart choices now can help down the road. What questions do you have about divorce finances? For more on the topic, see: