Divorce can be expensive and stressful. One way to make things even more expensive and stressful is to be messy with your finances.
“Money problems can cause terrible stress in the best of times. When divorce is added to those problems, the mix is often personally and emotionally devastating,” said Attorney and Certified Financial Planner Violet Woodhouse.
An important step to take during divorce is to keep a close eye on your financial health so you can enjoy a stable financial future once you are out on your own. Failure to tie up loose ends could lead to a world of trouble down the road. Here are four financial moves that may help make the transition from divorced to single a little smoother.
1. Change all of your passwords
If you and your partner shared everything, including passwords, you’ll want to make sure you change the password for each account. This is especially important when it comes to financial accounts. Don’t forget to also change your ATM personal identification number if you have ever given this information to your spouse so that he or she could withdraw money on your behalf. Although it’s not advised to share your PIN, some couples do exchange this information. So act quickly and change all of this information as soon as possible.
2. Close joint accounts
Don’t forget to close joint financial accounts, like credit cards and bank accounts. If you were an authorized user on your spouse’s credit card, call the issuer and ask to be removed. If you and your spouse were joint account holders, you’ll need to close the card and figure out a plan for the two of you to pay off the debt. Staying on top of joint accounts may help you avoid nasty financial surprises, said Bankrate credit expert Janna Herron:
It’s a good rule of thumb to decouple any credit card accounts during divorce to protect the credit of both parties. It’s easy for authorized user credit card accounts. The account holder simply calls the issuer and asks to remove the authorized user from the card. If the account holder forgets to call, typically the authorized user can request to be taken off the account. At the very least, the authorized user can contact the credit reporting bureaus to dispute the account on his or her credit report.
3. Revise your budget
Now that you will be living on one income, your financial picture will look a lot different. There will be less money to spend since your household income has been reduced by half, so adjustments will be necessary. You can get a handle on your finances by developing a budget. Meeting with a financial planner can help you set realistic financial goals and follow through on them. Just make sure to meet on a regular basis (for example, quarterly) so you can see if you’re still on track with your money. You can find a financial professional when you visit the Certified Financial Planner Board of Standards website and search their online directory.
4. Tame your spending
You may be tempted to stray from your usual financial habits after going through an emotional divorce. However, resist the urge to engage in retail therapy. You’ll only dig yourself into debt and cause more stress. This is why it is so important to develop—and stick to—a budget.
“Divorce is an emotional rollercoaster…people tend to make absolutely terrible financial decisions when they’re on that rollercoaster, feeling ‘up’ one minute and then ‘down’ the next…It’s no real surprise that you may not be able to think clearly about financial matters, such as how your assets might get divided, tax liabilities, and what your living expenses might be 10 years from now,” said Certified Divorce Financial Analyst Jeffrey A. Landers.