According to the APA, 40-50% of marriages in the United States end in divorce. Although research now suggests that this percentage is gradually decreasing with time, the number of people going through a divorce today is still in millions.
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Regardless of the numbers, only those who have gone through a divorce know how difficult it can be for both partners involved as well as the children.
It is not just about starting a new life from scratch and having to deal with the emotional turmoil attached to it, but you must also consider the financial implications of the decision to call it quits.
Since you will no longer be a single household, you now have to reevaluate your finances and figure out how you will get by on your own.
While living as a married couple, spouses tend to pool their income and assets. After the divorce, however, the income may decrease significantly as each partner has to think about their own separate finances and find ways to support themselves.
For women who may not have been working full-time as due to raising children, financial planning is even more crucial because the working spouse is likely to have looked after all the financial affairs while the custody of the children and consequently, some of the related expenses is likely to fall on the women.
Not only that, divorce is an expensive process by itself. The average cost of a divorce is approximately $15,000 per person in the US. This includes the attorney fee, court costs and the cost of hiring experts who deal in child support, taxation and real estate.
The cost for each divorce case varies depending on the number of assets owned, whether custody of the children is involved and the extent of agreement and cooperation between the parties involved.Nonetheless, it is a process that is time-taking, strenuous and costly.
Due to these reasons, it is crucial to ensure you have your finances sorted before you decide to call it quits and this is where divorce financial planning comes in.
The Importance of Divorce Financial Planning
The aim of divorce financial planning is to develop strategies that allow an individual to achieve the most beneficial divorce settlement according to their personal circumstances.
It ensures that you are fully aware of the value of your possessions, the possible courses of action you can take, and how you can ensure long-term financial stability after your divorce.
Since divorce is a very challenging time for any individual, where you may not always be in the right frame of mind to make decisions, it makes sense to seek the assistance of a divorce financial planner who can guide you every step of the way and ensure you do not make any costly mistakes.
With their vast knowledge and experience in dealing with all financial matters related to divorce, these professionals can take the burden off of you and help you protect your future.
Here are 7 reasons why it is vital to consult a divorce financial planner before you decide to walk out on your marriage.
1] Help You Understand Your Current Financial Situation
For most couples, one spouse is usually more active in managing the finances, whether it is keeping monthly expenditure within a budget or investing the mutual savings. This can leave the other spouse, who has not handled the finances, feel completely lost at the time of divorce.
A financial planner can be particularly useful in this case as they help you understand your current finances and how they work, helping you prepare for your future alone.
2] Help You Focus on Priority Financial Needs
At the time of divorce, many couples prolong the process by arguing over petty issues. It is a time when your emotions take a toll on you. Anger, frustration and anxiety may influence your actions and decisions.
A financial expert can ensure you don’t waste time on battles that aren’t worth fighting. They can give a neutral opinion on matters and keep you focused on your priority long-term financial goals.
3] Reasonable Division of Assets
Every couple may have a different set of assets they own and dividing them may seemfair to both parties, but sometimes it really isn’t once you take some factors into account. Imagine a situation where one spouse takes the house while the other takes liquid assets, such as investments in stock.
The stock holder enjoys a regular income through dividends while the property owner has to pay for high maintenance and upkeep costs. A divorce financial planner ensures reasonable division of assets, considering all financial implications.
4] Advice on Taxation Matters
Every asset you own, comes with a different tax liability and this must be taken into account when coming up with a divorce settlement plan. For example, retirement accounts are usually before tax, that means you don’t get to receive the full value of the account when you withdraw money, you only get the net amount after tax deductions.
A finance professional will be aware of all such tax implications of asset division, alimony and child support and will ensure you don’t lose out in any way.
5] Help You Draft a Post-Divorce Plan
A divorce financial planner will help you come up with a plan for handling your finances once the marriage is over.
They will help you calculate your post-divorce income and expenses such as those related to insurance, education of children and routine living expenses so that you can have a monthly budget to work with. You can also get guidance related to savings and investments.
6] Save Time
The longer it takes for you to settle the divorce, the more it will cost both you and your partner. Without the help of an expert, you are likely to take longer by first gaining an understanding of the technical process and then getting your financial information ready. A divorce financial planner can explain technicalities to you and help expedite the process at each stage.
7] Reduce Stress
A divorce is a stressful time as it is and when you add the complexity of having to divide assets and income between the spouses, it further adds to the pressure.
It is easy for a person who has limited financial knowledge to feel lost and hopeless in such a situation. The guidance of a professional who you can trust can really help alleviate some of the stress and make the process go much smoother.
Planning your future finances is always a nerve-wrecking task, and even more so at the time of something as significant as a divorce. While you will surely get advice from friends or acquaintances who have gone through similar experiences, the most useful guidance in such situations can only come from an experienced financial planner.
Why take any risks with your finances when a professional can guide you through the process and help ensure your financial well-being in the long term? Seek the help of a divorce financial planner today. It will be a decision you will be glad you made.
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