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.