Divorce will affect your financial future one way or another. In some cases, where your spouse was spending a lot of money rather than saving it or paying bills, it could be a welcome change. In other cases, it could mean you need to get a second job or downsize how you are living. Regardless, divorce will bring financial change to your life.
It’s a good idea to have an understanding of some of the types of financial issues a lot of people end up facing. Doing so may give you a better understanding of how to deal with them.
Issues Dividing Property
One of the first areas where financial problems can start is with the division of property. In a lot of divorces, people like to claim that they should get different parts of the property and assets. However, it’s not that simple. Just because one party wants something in the divorce doesn’t mean they will get it. There is a lot to think about first.
For starters, realize that Arizona is a community property state. This means that any property or assets acquired after marriage are automatically part of the marriage. They will need to be divided as evenly as possible.
However, any property or assets you had before marriage would be considered separate property. These would be things you can keep without needing to split them with your spouse… at least in most cases.
If you had separate property that you then spent community funds to enhance, upgrade, finish paying for, etc., it would become community property at least in part. This is where things can get somewhat confusing. You will want to talk with a financial expert or a divorce attorney if you have any questions regarding how certain assets will need to be split.
A lot of times, couples will negotiate with one another to sort through their assets. For example, just because you might be entitled to half the silverware and your spouse would be entitled to power tools, you might want to barter. They can get all of the silverware and you can get all of the power tools. Just keep in mind that the dollar value amount should be about the same.
Issues Dividing Debt
Just as there are often problems when it comes to dealing with dividing assets, dividing debts can be just as much trouble. One of the first things you should do, even when you trust your spouse, is to order a credit report from each of the agencies—Transunion, Experian, and Equifax. This will give you a clear picture of what you owe in your name, as well as joint accounts you likely still have with your spouse.
You want to make sure the debt doesn’t grow any larger during this time, which means be careful of spending too much. One of the best ways to do this is to cancel any joint credit cards you might have. Keep at least one credit card in your own name or get one.
After the debts have been identified, you will want to pay them off as soon as possible. Getting out of debt before the divorce is finalized is not always possible. However, if you have assets that you can sell or savings that you can tap into, getting rid of debt is a good idea.
Be sure both you and your spouse are taking responsibility for the debts you’ve incurred, and that they aren’t trying to make you pay for things that are technically their debt.
You might find that filing for bankruptcy and going through that before divorce is the better solution. For others, it might be working out an arrangement with the spouse. Allow them to keep more of the assets, but request that they also take more of the debt. Others will just share responsibilities for the debts equally.
If you feel that some of the debt you are being asked to pay isn’t fair, talk with an attorney. In cases where your spouse took community funds without your knowledge or permission and used them for selfish purposes that only helped them and not the community, a judge might say you aren’t responsible for them. Of course, this can vary from one judge to the next.
Spending to Make Yourself Feel Better
As mentioned, one of the issues that often comes up in divorce will be feelings of depression. People are unhappy with their current situation, and they want to do things to make them feel better. Often, this means spending on things they want but don’t need. While retail therapy might’ve been something you’ve done in the past, when you are going through a divorce, it’s a bad idea. It means you are spending money that could’ve been saved or used to pay down debt.
Deciding to Keep the House
One of the other issues that often crops up is that someone wants to keep the marital home. Maybe you have a lot of good memories there. Maybe you like the location or the layout. Regardless, you need to truly decide whether it’s a good financial decision or if your emotions are getting the better of you.
Just because you like the home isn’t a good reason to keep it. Too many people try to keep the home and then end up becoming financially overburdened. Think thrice before opting to keep the house.
Dealing with Retirement Plans and Splitting Them
If your spouse has a retirement plan and savings, you are going to be entitled to about half of it. The money that you receive could be used for any number of things. You might want to use it to fund your own retirement plan, or to help you survive as you are getting back on your feet.
There are many implications for your retirement plans as well as taxes when getting divorced. It’s a good idea to speak with a specialist who knows the ins and outs of finances. They can help you to make the right decisions.
Those who have little in the way of possessions and debt, such as a couple that has only been married a short time, will not have the same financial woes as someone who has been married a decade or more. However, even if you have a simple divorce case, you might still want to consult with a financial specialist and an attorney.