Simple Divorce Advice

Whether you are instigating a separation and eventual divorce or you have had it sprung upon you one thing is sure your finances are more than likely going to take a beating. Divorce can decimate bank balances and cause more debt, especially if a couple is no longer living together yet still on the same income.

Organising a divorce financial plan should be one of the first things to be discussed once the separation and divorce are a reality. Leaving these sorts of discussions until bills start piling up will only cause more heart ache and fighting. If you, as a couple, have been able to cover your costs and pay your bills during your marriage then you should now be able to work out how you are planning to pay for the living expenses and divorce bills from your income. It has not change, just the circumstances surrounding it.

Planning the finances for this time will allow you to estimate how long you think the divorce should take which will give both of you a time frame for negotiating a settlement. You will understand that if the time frame is breached then the money will have to come from somewhere other than what has been budgeted.

Financing a divorce can be done in many ways. Most divorce professionals want to be paid as they work and will send regular accounts. There are some law firms who will collect at the settlement of the family home being sold. They will have you sign a document agreeing to them getting their cut before you see any money, much like a mortgage with a bank. This can be a huge weight off for many people as they may be asset rich but cash poor. Keeping an eye on the account is recommended as these sorts of arrangements have no pressure and people may tend to spend over their expectation.

Some couples realise that they cannot live separately on the income they share and need to arrange extra income for the interim divorce proceedings. Extra income can be found in taking more from the mortgage, cashing in investments or selling assets.  This should only ever be done if both parties agree and have had a legal agreement drawn up with independent legal counsel. This course of action can be of benefit as it is immediately obvious that money is being spent and assets lost to the divorce proceedings. It is obvious for the participants that the faster settlement is reached the better for all.

Depending on the amount of money released after selling assets or drawing down on the mortgage, a budget should be drawn up to make sure the money lasts the distance required. If necessary one or the other law firms can hold the money in trust and only release it as required and agreed.

The most important thing in drawing up a divorce financial plan is to accurately budget for every expense that may occur including incidentals and the unforeseen such as accidents, breakages and disasters. The first step is to draw up an accurate account of all your debts for each and every month that will include all legal and other divorce accounts, any new accommodation expenses agreed upon by both parties and all the normal bills and debts you share as a couple. Make this list as comprehensive as possible as you do not want to under budget, it will only cause problems in the long run.

As a couple you will have to decide how you will finance the divorce and your lives while the proceedings are underway. People who manage to do can then begin the nitty gritty divorce proceedings without the added burden of wondering where the next dollar will come from and worry over bills. Having a divorce financial plan is a sensible first step in any divorce or separation.

Anthony is one of the co-contributors to Win Your Divorce The Workbook – available here. This workbook has been written to cover all areas of divorce and to give our readers the help they need to move forward through the divorce process and into a new life.

Excerpt from: Divorce Financial Planning Is There Such A Thing?

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