Though divorce inevitably leads to financial changes, it doesn't have to lead to financial devastation. The following are some important things to keep in mind for those going through a South Carolina divorce or separation as well as advice for how to avoid making costly mistakes:
Prepare a Budget
It sounds simple, right? Though preparing a budget may seem obvious, experts say that people going through a divorce rarely sit down and run the numbers to see how the split will impact them financially. Instead, many people get by with rough estimates in their head. One common problem is that people assume they will lose their spouse's income, but that their expenses will also be cut in half, negating the loss in money. However, this is often far from the case. While some expenses (such as groceries, water bill, and a few other categories of expenses) may drop a little, the reality is that your car payment, your house payment, and many other major expenses will stay close to the same. Rather than “guesstimate”, you need to sit down and prepare a detailed budget, making sure that your income alone is enough to cover the bills you will need to pay each month.
Reevaluate Retirement Savings
After the equity in their home, retirement savings are typically the next largest asset that couples have. During a divorce, these accounts are usually divided, ensuring that both parties walk away with a share of the retirement nest egg. The problem is that some people forget that this money should be put away for their future and instead treat this as a cash infusion to be spent now. Rather than spend now and worry later, it is crucial that any retirement money received be rolled over immediately into a new account in your name only. You'll need to do some planning and make sure that your retirement goals can still be achieved with only your income, and if not, you should make some changes to your plans. Better to do this now rather than to wait decades and discover there's a problem.
Review Your Life Insurance
Many people assume that there is no longer any need for life insurance after you've divorced. However, this is not always the case. For one thing, you may still want to provide for your children. Also, if you were ordered to pay child support or alimony in the divorce, life insurance may be required to guarantee that these payments continue in the event of your untimely death. Even if you intend to keep the same level of insurance that you have now, it is possible you were covered under a spouse's plan and may need to do some shopping for your own coverage. Divorce is a good time to pause and reevaluate your insurance, as well as other financial needs.
Source: “5 ways to keep a divorce from being needlessly expensive,” by Jonnelle Marte, published at WashingtonPost.com.