Divorce is a major financial transaction, both in what it costs for the divorce itself and for what it does to a couple’s income and assets. Here are some tips and advice for keeping the costs of divorce manageable and emerging from the split in the best financial shape possible.
Financial tip #1: Remember that fighting costs money
As Dallas divorce attorney Scott Downing says, “You have to pick your battles. It doesn’t make sense to spend $30,000 fighting over a $5,000 asset.” (D Magazine, Oct. 2011, p. 127) “Try to think of it as a business transaction,” advises one woman who used a mediator to handle her divorce. “You’ll save a lot of time, energy, and money.” (The Week, 5-20-2011)
Financial tip #2: Work it out with each other ahead of time
The more issues you can work out on your own before it gets into mediation, the less it will cost you for these professional services. Spouses who work out as many financial and practical details as possible between themselves can save quite a bit of money.
Financial tip #3: Help your lawyer
If you do end up using an attorney, be aware that your costs can typically be reduced when you take on some of the tasks yourself, such as collecting important documents, gathering bank statements, or assembling other information that will help your case.
Financial tip #4: Have a nest egg
In the best case scenario, each of you should build up a small little nest egg to cover unexpected costs once the divorce is final. You are likely to encounter unexpected costs, so start saving your pennies now so that you can absorb these surprises. If you’re not in a drag-out brawl with your partner, postponing the divorce or continuing to share a residence until both of you are on stable financial footing will help the post-divorce adjustment go a lot more smoothly.
Financial tip #5: Recognize there are no do-over’s
What is initially decided in a divorce can be very difficult and expensive to undo later, if not impossible. So be sure to do your homework.
Financial tip #6: Work out who claims children as dependents
Be sure to specify who will claim the children as dependents and have this spelled out in the divorce documents. In years past, the higher earning spouse often got a bigger benefit, but starting in 2013 the personal exemption phases out for single filers starting at $250,000 in adjusted gross income, so sometimes the lower earning spouse will derive more benefit from claiming the kids as dependents on their taxes.
Additional Divorce Finance Tips:
- If you’re not sure of finances; do a financial background check on your spouse.
- If your children are girls, consider putting it in writing how their weddings will be paid for.
- You might also want to consider stipulating that each spouse contribute to a college fund for your children.
- Health insurance can be a big problem for women, many of whom were on their husband’s policies. Consider stipulating that he pay, or keep you on coverage until you can get your own.