Perhaps the most substantial effect of a divorce is that when it’s complete, the spouses must each maintain their own households and finances. The transition to this post-divorce environment can be eased by taking a proactive and informed approach. 

Here are positive actions to take when preparing for your post-divorce financial life:

1. Understand your current financial picture — Begin by gathering documentation about all your assets, debts, income, expenses and investments. Relevant records include tax returns, bank statements, mortgage documents, credit card balances and retirement account summaries. Being informed will help you make sound decisions during divorce negotiations.

2. Consult an attorney early — A knowledgeable Arizona divorce attorney can explain how the courts handle property division, alimony (spousal maintenance) and child support. An attorney can also advise you on the implications of signing any agreements and help you consider future financial consequences rather than just immediate needs.

3. Evaluate your expenses and create a budget — Your lifestyle and household expenses will likely change after divorce in terms of cost of living, housing, insurance and child care. Create a realistic budget that factors in possible income fluctuations and expenses associated with setting up a new household. Understanding expected income and necessary expenses will help you avoid financial pitfalls and plan effectively for the future.

4. Make thoughtful asset choices — Divorces often involve splitting assets such as the family home, retirement accounts and investments. An attorney can help you weigh the pros and cons of keeping particular assets. For example, holding onto the family home may come with high upkeep costs and tax liabilities. An attorney can also guide you in considering asset liquidity and tax implications when making settlement decisions.

5. Consider long-term financial security — Divorcing individuals should consider their long-term financial security, not just short-term gain. An attorney can assist in negotiating for a share of retirement accounts, prioritizing investments over depreciating assets and ensuring spousal maintenance arrangements are fair and enforceable. Be mindful that a Qualified Domestic Relations Order (QDRO) may be necessary for dividing certain retirement plans.

6. Address insurance and beneficiary changes — Divorce requires updating health, auto, life and property insurance. You may also need to remove your ex-spouse as beneficiary on retirement or investment accounts, as well as from your will. Reviewing and updating these documents during and after divorce to prevent unintended bequests and ensure your wishes are honored.

7. Set up an emergency fund and build a credit history — After divorce, financial independence is critical. Start a rainy day fund for unforeseen expenses. Also, to build and maintain good credit, consider opening new accounts in your own name. Monitor your credit report for errors or unresolved joint debts.

At Clark & Schloss Family Law, P.C. in Scottsdale, we have a wide range of experience in helping client plan their post-divorce futures. Please call 602-789-3497 or contact us online for a free initial consultation.