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How Will a Divorce Affect my Finances?

Whether you are in Auburn or anywhere else in Alabama or around the country, getting divorced is expensive. Not only will there be large one-time costs to pay for attorney fees, legal filings, etc., there are also likely to be some adverse ongoing financial consequences as well.

About one out of every five women fall below the poverty line after a divorce, and most men experience a large drop in their standard of living as well. A divorce can also have adverse financial effects on the children.

Here are some of the most significant ways an Auburn divorce may affect your finances:

  • Lower Income: Although Alabama law calls for the payment of child support and in some cases spousal support, those payments will be less the combined income the couple had when they were together. The paying spouse will also have a reduced income because of the payments, which means that both spouses will probably have a lower standard of living at least in the short term.
  • Fewer Assets: When you are married, you own all of your assets together. After the division of property, you will probably end up with around half of the marital estate. This, of course means a lower bank account balance, less money in your retirement account, and a diminished amount of other property.
  • Higher Expenses: When a couple gets divorced, they are now faced with having to support two households on the same combined income. This means double the housing payments, double utilities, and probably higher food costs as well.
  • Damaged Credit: Your credit is not directly affected by a divorce; in other words, the credit reporting agencies will not lower your score simply because your marriage was dissolved. However, the indirect effects of a divorce can damage your credit score. For example, your spouse could run up credit card bills on a joint account that has your name on it. Or you might have to use more of your available credit to cover short-term expenses. Either of these or similar scenarios can result in a lower credit score.
  • Fewer Opportunities for Children: With a diminished income, you may not be able to afford some of the “extras” that you want for your children, such as paying for sports leagues, music lessons, extra tutoring, or private school. It might also be more difficult to contribute to any college fund you have set up for your kids.
  • Tax Consequences: Once you are divorced, you will have a different filing status and you might end up in a different tax bracket. There may also be other tax implications if you have to sell the marital home, sell a business, or make other major financial decisions.

Surviving Financially after an Auburn Divorce

What we have discussed so far in this article sounds pretty grim. But this is reality – divorce is hard financially, and you need to be mentally prepared for it.

All of that said, getting divorced does not mean you will have adverse financial circumstances forever. There is definitely an adjustment period, but you will get through it, and many people even come out financially stronger on the other side.

Here are some ways to deal with the financial impact of a divorce:

  • Understand your Finances: Take an inventory of your income and assets, so you have the full picture of what you will be dealing with going forward.
  • Decide What you Can Afford: It may be tempting to want to stay in the marital home for sentimental reasons, but it might not make financial sense to do so. Take a look at what housing payment you can afford and plan accordingly.
  • Create a Realistic Budget: Understand that you will need to live on less and make a budget that you will stick to. Budgeting is not the most enjoyable thing to do, but your ability to live within your means is the first step toward financial freedom.
  • Protect Your Credit: Take immediate steps to mitigate the effects of the divorce on your credit. Close any joint credit accounts so your spouse will not be able to cause you any damage. Also, try to open some accounts in your name only, so you have more available credit in case you need it.
  • Think About Ways to Increase your Income: Your income will take a short-term hit, but it does not have to stay this way forever. If you are not already working, consider re-entering the workforce if that is an option for you. You may also want to look at getting additional schooling which might open the door for better opportunities, or if you have an entrepreneurial spirit, maybe there is a business you have always wanted to start but felt inhibited to do so by your marriage.
  • Seek Professional Financial Guidance: Not everyone is strong in the area finances, and you might need some professional help to get you grounded in this area. If so, find a reputable financial advisor who can help you create a solid plan going forward.

Work with an Experienced Auburn, AL Divorce Attorney

Because of the adverse financial effects of a divorce, you will need a lawyer who has extensive legal experience and is committed to advocating forcefully for your best interests. In Auburn, Opelika, and the surrounding communities, get in touch with Alsobrook Law Group today for assistance. Message us online or call our office at 334.737.3718 to schedule a free consultation. We look forward to serving you!

Financial Pitfalls of a Divorce

Your Money: How to Deal with the Financial Pitfalls of a Divorce in Auburn, Alabama

Whether you are in Auburn, Alabama, Anchorage Alaska, or anywhere in between, the issues involved with a divorce are largely the same. For divorcing spouses, emotions run high, and the process can take a major toll on your finances as well. The good news is that, within three to five years, most people feel like they have mostly recovered from the emotional and financial impact of the divorce. But before getting to that point, there are a lot of challenges and difficulties to overcome.

If you are in Auburn, AL or any surrounding community and you are considering a divorce, you do not want to face this journey alone. With the right lawyer, you will have a strong advocate in your corner who is looking out for your rights and interests and doing everything possible to mitigate your financial circumstances as much as possible. Call the Alsobrook Law Group today at 334-737-3718 to begin a conversation with a member of our legal team. Our initial consultation is free, and we are looking forward to serving your needs.

Taking Control of Your Finances During an Auburn, AL Divorce

A survey from a few years ago by Fidelity found that 80% of spouses who were not involved in the daily finances during the marriage regretted this after getting divorced. Those in this category also say it took longer to recover from the financial stress of the divorce, and approximately 40% say they still have not recovered.

With this in mind, the first action you must take to deal with the economic pitfalls of a divorce is to get involved your finances ASAP. Maybe you have always maintained that money is not your “thing”, and you have left this area up to your spouse. But if your marriage is on the rocks and you are considering parting ways, you can no longer afford to be passive in this area.

It is time for you to find out where you really stand financially, and to get control of this area in the event that you have to go out on your own. This might mean asking more questions and having some difficult conversations, but it needs to happen in order for you to protect your financial future.

At the very least, each spouse should know and understand some basic things about the family finances. Here are some financial areas that you should educate yourself about:

  • Bank accounts;
  • Retirement accounts;
  • Tax returns;
  • Home mortgages;
  • Car loans;
  • Insurance information;
  • Credit cards;
  • Personal loans;
  • Utility bills;
  • Monthly income of each spouse;
  • Monthly household expenses;
  • Miscellaneous income and expenses.

Make sure you communicate clearly with your spouse about financial matters and insist on openness and transparency. Because whether you end up getting divorced or not, it is always in your best interests to have a better handle on the household finances, and to be able to provide greater input on how your money is being spent.

Tips for Dealing with the Financial Challenges of a Divorce

The cost of living index in Auburn is higher than most other Alabama communities, and it is slightly higher than the national average. The average family in this area spends about $2,000 per month on housing costs, and when you suddenly find yourself maintaining two households on essentially the same income, you will need to learn to live on less than you did before. Things could change for the better in the future, and you may be able to get a better job and increase your income, but at least in the short term, there could be some financial difficulties.

There are several things you can do to help get you through this transitional period of your life, here are some of the most important:

  • Sever Financial Ties with Your Spouse: One of the first steps to succeeding on your own financially is to ensure that your ex-spouse (or soon to be ex-spouse) is no longer involved in them. If there are any joint bank accounts, transfer whatever amount belongs to you into a separate account. In addition, close any joint credit card accounts, so your spouse cannot run up charges that could potentially damage your credit. Read your divorce decree carefully to determine how your assets and debts are to be divided and get everything that is yours transferred into your own name.
  • Develop a Budget: As we talked about earlier, after the divorce, you will have more household expenses with the same income. One of the best ways to address this issue is to create a budget to work from (if you do not have one already). Having a budget helps ensure that you will be able to stay afloat financially, and it should include allocations for essentials such as your housing payment, utilities, food, clothing, and transportation. What’s left over can be used to pay off debt and save (more on these in a minute), and after that, you will have your disposable income.
  • Create an Emergency Savings Account: One thing you can count on going forward is that unexpected situations will arise. This is why every family should have an emergency fund. In the absence of such a fund, the first reflex for most people is to use their credit cards for this purpose. But this only creates a financial hole that will become increasingly difficult to climb out of. Take a portion of your disposable income (whatever you can afford) and start putting it away in an emergency account. Do this until you have at least a few months’ worth of income saved up. This might take a while, but as long as you are continually adding to it, you are making progress.
  • Start Paying Off your Debts: Along the same lines as the previous point, do whatever you can within your budget to pay down your debts. Start with the unsecured debts that have the highest interest rates, which would most likely be your credit cards. Pay them off at whatever pace you can afford, the important thing is to do something each month and make sure you are going in the right direction.
  • Invest for your Future: While you are saving money in your emergency fund and paying off debt, you might also be able to start funding your retirement. Maybe you already have a retirement account through your work, or you received half of your spouse’s account from the divorce. Whatever you have to start with, do what you can to build this up each month. And if you happen to have a 401(k) plan through your job in which there is an employer match, try to take full advantage of this. This is basically free money that they are giving you just to invest in your retirement.
  • Seek Professional Financial Guidance: For many Auburn area residents, getting control of their financial life after a divorce seems like an overwhelming task. This is understandable, especially if you do not have much experience with money matters. If this is the case, you might want to consider reaching out for help from a reputable financial advisor. You can ask your attorney or a trusted family member or friend to recommend a financial expert for you, or you could seek help from a professional organization such as the Institute for Divorce Financial Analysts.

Contact a Knowledgeable and Compassionate Auburn, AL Divorce Lawyer Today

There is no doubt that divorce will cause a financial strain that could take a while to recover from, but by taking the right steps, you can get through this difficult season of your life and come out stronger on the other side. If you are facing a divorce in Auburn, Opelika, or any of the nearby Alabama communities, contact the Alsobrook Law Group for assistance. Call our office at 334.737.3718 or message us online to schedule a free initial consultation.