Divorce rates among all segments of our population are growing and the explosion of family lawyers is evidence. Some blame the longevity promised by access to good medical care for the increasing number of “grey divorces” among the elderly. Others blame societal factors on the overall increase of divorces.
But the data is indisputable; more people are divorcing these days which means that the likelihood you or someone you know may have to endure this painful experience is increasing. The good news is that with information and knowledge comes power, particularly when it comes to finances. Misunderstanding the financial impact of divorce is one of the most common mistakes a person can make and can yield very long term and painful consequences.
That is why it’s important to arm yourself with as much information as possible. Here are some important tips on how to protect yourself financially in your divorce.
Mediation is part of a broader area of the law called “alternative dispute resolution”. That’s just a fancy way of saying solving your disputes without going to court. Mediation is where an experienced neutral third party listens to each side and then offers counter-arguments, suggestions, and creative solutions to bring the parties close enough that they can agree on a settlement. This approach can trim months, even years, off a divorce which means huge savings in legal fees. Mediators are often lawyers or former judges experienced in divorce law and have a firm grip on what is likely to be the outcome should you go to court.
Mediation also allows the couple the maximum flexibility in crafting their own settlement agreement, rather than having the court impose a resolution. It’s always better to have control over the outcome, even if you don’t get everything you want. The only situation where mediation may not be appropriate is if one spouse is hiding assets or refusing to come clean on a particular aspect of the divorce. It’s important in a mediation that both parties want to come to a fair and equitable solution.
Information Is Your Superhero
Being in the dark about your finances may be the biggest pitfall a spouse can encounter. It is extremely common for one spouse to handle the finances and the other to just “go along”. If you’re contemplating divorce you must reverse this trend. Start to document assets, income, tax liabilities, insurance policies and anything else that might have a financial impact your divorce. Make copies of bank statement, brokerage statement, tax returns, credit card statements, etc. Remember, many of these documents are now paperless so you may have to look in email for notifications or log onto web sites to get the documents you need.
Budget… Budget… Budget
This is a difficult item for most individuals because it requires discipline and consistency. However, producing an accurate budge it crucial to documenting what kind of support you may need (if you’re seeking support) or what are the “real” expenses incurred in the household every month if you contemplate having to pay support.
Remember, while divorce may be one of the most emotional experiences of your life, to the extent you can you should remove emotion from your planning and evaluation of settlement agreements. Using a mediator can help with this. Accurately budgeting and becoming an expert on your finances will also help.