Wednesday, June 22, 2011

Preparing for Disaster Series (Part 6 of 10): Divorce

A common disaster which many people don't prepare for is divorce. It's interesting that 50% of US marriages end in divorce yet this is one type of disaster that no one prepares for (I guess if you did go into marriage preparing for divorce, it would kind of take the fun out of the whole thing!). So, while hopefully you stay married for a good long time (hubby and I have made it 25 year so far!), there are some things that everyone should be aware of in the event of a divorce.

  1. Be debt free. Much like if a spouse dies, being debt free takes a lot of financial pressure off of both parties in the event of divorce. The last thing you want to do is be reduced to one (or no!) income and be awarded half of the debts.

  2. Have a pre-nup. If you both start out with nothing, obviously a pre-nup isn't necessary. However, combining a couple with one or two giant incomes and/or lots of inherited money and property, pretty much dictates that some sort of agreement gets put in place before the wedding in order to protect both parties financially as well as their heirs. Unromantic? Totally. Financially savvy? Totally.

  3. Do the whole pre-marriage counseling thing before you get married. Since money problems account for nearly half of all divorces, you would think people would want to have some pretty clear discussions about finances before they get married. This usually isn't true, however, because talking about money is uncomfortable and can be contentious and when you are blissed out in love, the last thing you want to do is upset the apple cart. It really does pay to discuss financial goals, rules about spending and saving, and future money issues (what happens when kids arrive, how will you help your family financially, etc) before the wedding.

  4. Both the husband and wife should be 100% involved in the family finances. Both should know how much money is coming in and from what sources, how much money is going out and to whom, and how much is being saved and where the savings are kept. Each spouse should have their own mini emergency fund (around $1000) as well as their own "no strings" spending money each month. Secrets about any of these things can lead to divorce (ever try to keep a mistress when they wife knows here every penny goes?) and can lead to problems divvying up the estate after a divorce (a friend of mine had no clue about any of these things even after being married almost 20 years which made it that much more difficult--and expensive--for her attorney).

  5. When marriage problems crop up, and they always do, fix them immediately either with some knock-down, drag-out conversations or a marriage counselor. Many times people know there is a problem in their marriage but it is just easier to act out than to fix the problem. Note that acting out usually has financial repercussions for the family--like the wife continually running up her credit cards to improve her self esteem and/or get back at her husband, and the husband going out and buying a boat without even consulting his wife.

  6. Consider divorce seriously before acting. Divorce is never easy (you couldn't pay me enough to work in the drama that is family court!) but many people think it is a simple answer to their marriage problems. Obviously you shouldn't stay miserable for your entire life but if a marriage can be fixed it should. Getting divorced will cut your household income dramatically and up your household bills exponentially (you never have to put a price tag on raising kids until you start paying child support). Divorce can also impact health insurance benefits, life insurance benefits, Social Security income, and income tax breaks among other things.

  7. Both spouses should always #1--have their own emergency fund, #2--be able to earn their own income, #3--have friends they can turn to for support, #4--know their rights concerning separation and divorce.

  8. When it comes down to getting divorced, remember: never use the kids for leverage or to bring messages to the other person because you don't want to talk to them, a lawyer will be expensive and a good lawyer will be even more expensive, a heavily contested divorce will make you poor and your lawyer rich so try to play fair and work out as many details of the divorce as possible, don't obsess over your soon to be ex to the point of stalking/violence/other bad isn't worth it.

  9. No matter who instigates the divorce, you will both be emotional disasters for a while...some longer than others. There is no quick way to get over a divorce except for time. You need to give yourself enough time, coupled with enough distraction (like work, exercising, caring for your kids, etc) to grieve the death of your marriage.

  10. Some technical after divorce stuff: changing titles on your car and house, refinancing the house into one or the other's name, changing beneficiaries on life insurance, changing coverages on health insurance, closing joint bank accounts and opening individual bank accounts, ditto for credit cards/investment accounts, updating your will and Power of Attorney, separating out business things if you jointly owned a business,

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