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First 5 Steps To Take To Protect Your Finances After A Divorce


Divorce is undoubtedly one of the most difficult times in a person’s life. At a time where most people find themselves at the end of their rope emotionally, it’s challenging to remember the essential steps to take to protect yourself financially. As you prepare to divide your assets and move forward with your life, here is a list of the top 5 actions you should take to secure a solid financial future for yourself: 

Avoid Rash Decisions

In the midst of such a tumultuous time in your life, it is essential that you avoid making any major decisions, especially those that will have a significant impact on your finances. While you are waiting to sort out the uncertainty of your divorce terms, stay away from any major purchases such as a new car or home, or any lavish vacations. These are all items you can explore once your divorce has been finalized and you have a working budget in place.


Get a Team Together

The best possible outcome for your situation will be the result of a team effort. First and foremost, find a divorce lawyer. Look at reviews online, and call around to a few– take advantage of the free consultations most provide to ensure you are comfortable and have a good working repertoire. Be sure to ask your lawyer about collaborative divorce also, it has the potential to save you money, as well as stress in negotiating vs. court time. Secondly, explore the option of hiring a Certified Divorce Financial Accountant (CDFA) to help you manage your finances and come up with a plan. Also referred to as a forensic accountant, these specialists can help you in getting organized and presenting your financial case. Should you find yourself having trouble coping, find a therapist to speak to, and never underestimate the emotional support you can find from your friends or from any local divorce support groups. It is important to keep yourself strong both financially as well as emotionally during this time.


Create a Budget

A good rule of thumb is to focus on your “Four Pillars:” food, shelter, clothing and transportation, during a time of financial stress. When making purchases focus on these core items, and determine whether there are alternative purchase options to save money in the short term (i.e. taking public transportation instead of buying a new car). From there, write down a budget—start by listing out all of your regular expenses, followed by all of your estimated purchases for the month. Adjust this plan weekly to determine if your expenses exceed your income, and if so how you can make up for the difference.  Establish savings and major purchase goals for yourself to ensure long term financial success.


Get Your Documents Organized

When the time comes to divide your assets, it will be crucial to have proper documentation.  Have copies of financial statements (for both your personal and for your joint accounts), for at least 3 years’ time. Be sure to monitor these accounts regularly, to be sure any large purchases made after the decision to get a divorce are not on your record. It is also important to take inventory of any major documents your ex-spouse may be associated with, such as your will. Your lawyer will be able to help you make any necessary edits. Lastly, when it comes to 401(k) or IRA accounts, don’t automatically assume because your name is associated that you can assume ownership. They may be considered “marital property” and are therefore, subject to negotiation. Division of these funds is  governed by the QDRO legal document or in your divorce decree.


Establish Your Own Credit

Close or freeze any joint accounts, as well as any accounts that your ex-spouse would have access to as soon as possible. You should still have some accounts open to protect your credit, so now is a good time to think about opening a personal credit card if you don’t already have one.  Your credit score may go down due to the closing of accounts, or due to debt being racked up in the process of your divorce. Don’t panic. You’ll be able to repair your score with time. If you feel there is a cause for concern, enroll in a credit monitoring program to get a hold of the situation, or consult with a CDFA who will be able to point you in the right direction with any steps you should take.


In summary, it is important to avoid rash decisions, and to seek out the resources you will need to establish a smooth financial separation. Should you find yourself curious about collaborative divorce, or divorce accountingcontact Stampone & Associates at 215-277-1191.