What steps should you take to help you navigate your financial life through divorce?
Divorce of separation is not only emotionally challenging for you and your family, but it impacts many key areas of your financial life, including your ability to maintain your lifestyle and your ability to reach your long-term financial goals.
Below are some important topics and ideas to consider that may give you a better perspective and bring clarity to a difficult situation moving forward.
Create or revisit your financial plan.
Starting over on your own provides an ideal opportunity to reevaluate your cash flow, retirement goals, education funding and insurance needs. You can also review your current investment portfolio, asset allocation, asset-protection strategies and estate plan. This process can assist us as we create a strategy to help you meet your most important financial goals.
Address your new circumstances.
Perhaps one spouse stayed home with the children and is returning to work as a result of divorce. Often, the income that supported one household must now support two. Consider completing a budget worksheet that outlines your major fixed expenses—housing, insurance, food, utilities, transportation and clothing—to determine a prudent spending plan.
If you and your soon-to-be ex-spouse own one or more homes together, the future of those assets may now be uncertain. You may both determine that the houses should be sold, or perhaps they will become part of your divorce settlement. Either way, don’t let mortgage and tax payments lapse; be sure to fit real estate expenses into your overall budget.
For auto and life insurance coverage, consider reducing your premiums by raising deductibles or dropping coverage you don’t need. You can reevaluate any of these strategies when your post-divorce financial picture becomes clearer.
Debts are another issue: Creditors can pursue you for debts incurred on joint accounts during your marriage, even if you did not personally incur them. So you could be held accountable if your former spouse made a purchase and stopped making payments.
To alert you to outstanding liabilities you might not know about—and to make sure there is no erroneous data—obtain credit reports and scores from the three main credit bureaus once a year. Credit bureaus can charge fees to provide your scores, but federal law allows you one free credit report every 12 months.
Try to boost your savings to the greatest extent possible.
Change your beneficiaries.
If your ex-spouse is still listed as your estate’s primary beneficiary (or executor), make it your top priority to update your will. We should also review your life insurance policies, annuities and retirement accounts. The beneficiary listed on those documents will supersede the beneficiary named in your will in the event of your death, so change those designations as soon as possible. The same goes for representatives named in healthcare and financial powers of attorney. If your children are minors, you’ll also want to name a guardian of the estate. Your legal advisor can direct you, depending upon your particular situation.
Take a close eye to retirement savings.
The expense of divorce may have taken a chunk of your retirement nest egg, so try to boost your savings to the greatest extent possible. If you’re working, it’s essential to put as much into your 401(k) as you can. If your cash flow is a little tight right now, still try to contribute at least enough to receive full employer-matching contributions.
It is important to note that if you were married for at least 10 years and do not remarry, you may be entitled to Social Security benefits based on your former spouse’s earnings.
Don’t forget to consider the big picture.
We’d be happy at any time to get together and discuss how we can adjust your current finances to make sure you stay on track with your long-term financial goals.
Remember: This is a temporary phase, and we’re available to help you handle it so that you can move forward and achieve those goals with as little trouble and emotional pain as possible.
1 2Q 2014 UBS Investor Watch.
The information contained in this article is based on sources believed to be reliable; however, its accuracy and completeness are not guaranteed by UBS Financial Services Inc. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision.
Jesse Rodriquez is a financial advisor with UBS Financial Services Inc. at 888 San Clemente Drive, Newport Beach, Calif. 92660. UBS Financial Services Inc. Financial Advisor(s) engage Worth to feature this article. In providing wealth management services to clients, we offer both investment advisory and brokerage services, which are separate and distinct and differ in material ways. For information, including the different laws and contracts that govern, visit ubs.com/workingwithus. The strategies and/or investments referenced may not be suitable for all investors. UBS Financial Services Inc., its affiliates and its employees are not in the business of providing tax or legal advice. Clients should seek advice based on their particular circumstances from an independent tax advisor. Insurance products are made available by UBS Financial Services Insurance Agency Inc. or other insurance licensed subsidiaries of UBS Financial Services Inc. through third-party unaffiliated insurance companies. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. a subsidiary of UBS AG. Member FINRA/SIPC.
This article was originally published in the February–April 2017 issue of Worth.