When couples are in the midst of the divorce process, they have a lot on their minds. They are typically just trying to get through each day one step at a time. Often, the absolute last thing they want to face is their financial picture and what changes are taking place as a result of the dissolution of the marriage.
I work with clients through this process to manage their concerns around this subject and help bring clarity to their situation. No matter how you look at it, divorce is messy. Making sure the finances are in order can bring a sense of calm and peace of mind during such a tumultuous time.
Here is what you can be doing to get yourself ready:
1. The first item you want to look into is your income. I know, it seems like a no brainer, but many people are oblivious to what they are actually bringing home each month. How much is being taken out of your pay check for things like insurance, taxes and 401(k) contributions? What is really being directly deposited in the bank account? Will thatchange after the divorce? Will you be paying or receiving support? Will it be taxable toyou?
2. Next, take a look at your monthly expenses. Most of us spend money on products and services that we don’t even realize are adding up to large amounts by the end of the month. Banks are making it a lot easier to track spending by offering digital downloads to spreadsheets so you can easily add them up yourself. Learning how to build a cashflow for yourself can help you see clearly how the monthly expenses are getting paid. Some expenses may change post-divorce too, so this can serve as a baseline for
managing expenses once you are on your own.
3. Track down paperwork for other accounts. Do you have online bill pay for your cable bill, utilities, mortgage, student loans or credit cards? Do you have a retirement account, a 401(k) at work, a brokerage account, a money market or CDs at the bank? Find all of the account status reports and make sure you know the login and password for each of them so you can access them easily. If one person in the married couple managed all of these accounts, it can be difficult for the other person to gather that information. Make sure you are having that conversation before the papers are drafted so you know what
assets you have to negotiate and what portion you will end up with post-divorce.
4. Tax returns for the past two years can be a good source of financial information. Bringing these to your accountant, attorney or financial professional can help shed some light on the whole picture. Typically, there is supporting documentation that we gather each year and then keep it in the file with the actual return, never to revisit it again. Pull those out, dust them off, and find out what you can glean from them.
5. Now is a good time to do an insurance review. Most people take out insurance policies on themselves and their spouse when they get married, buy a house, or start a family. If that was a process you went through, you are paying premiums each year to carry that coverage. Bring the in-force illustrations to your financial professional and review them to see if the coverage is worth carrying anymore. Since there will be no dependent
spouse anymore, you may be able to save money by carrying less coverage. If there are minor children involved, there may be a provision in the divorce settlement to carry a certain amount of coverage for their benefit.
Along with that review, make sure you are updating the beneficiary on your retirement accounts and insurance policies. If you don’t, and something unforeseen happens and you pass away, your ex-spouse could inherit your assets that you would most likely have preferred someone else had benefitted from in your absence.
Wendy Althen is a Financial Advisor and Certified Divorce Financial Analyst® at Baird. She
works with couples pre-divorce, during the settlement process, and post-divorce to help
manage their financial decisions. She is a fully-licensed fiduciary and holds state licenses in
several states across the country. She does not provide tax or legal advice, but works alongside
your team of other professionals. She would be happy to connect via the information listed
Wendy Althen, CDFA®
Financial Advisor | Private Wealth Management | Certified Divorce Financial Analyst®
777 E Wisconsin Avenue
Milwaukee, WI 53202
(o) 414.765.1497 | (toll free) 800.792.2473 | (m) 414.243.4652
firstname.lastname@example.org | rwbaird.com
https://www.linkedin.com/in/wendy-althen- 422567 | Twitter: @WAlthen_baird
Certified Divorce Coach, Lawyer, Yoga Teacher, Divorced Parent