The process of divorce can be a devastating experience — emotionally and financially — and made that much more challenging by the uncertainties of what comes next. It may feel like a divorce uproots your financial stability, derails your retirement plans and questions whether you can maintain your lifestyle.
Fortunately, navigating a divorce can be made significantly easier with the help of a trusted support network. This may include personal relationships with family and friends, as well as professional ones with an attorney, tax advisor and financial advisor.
If you're considering a divorce, currently going through one or managing the financial aftermath, here are some concerns that your financial and legal team can help with.
Common divorce questions you may be asking
- How will this impact my housing situation and children?
- Will I have to adjust my budget/spending?
- How can I regain my preferred lifestyle?
- Will this derail my retirement goals?
- How will this affect my taxes?
How a financial advisor can support you during a divorce
Identify your assets and liabilities
A financial advisor can help you assess your financial picture. This includes identifying assets like savings, investments and properties, as well as liabilities like debt. Your financial advisor can also bring a unique perspective to the potential risk/reward of those assets — for example, the appreciation of a home versus the tax liability of an investment account. This can help you negotiate a fair settlement.
Having a true financial picture can give you greater confidence as you enter divorce proceedings and begin separating assets, or help you determine your next best steps once the separation is final.
Make budget updates and a new spending plan
Once you and your ex-spouse separate your finances, you’ll likely have to make updates to your budget and spending based on your new situation. You may also have to consider new forms of income like returning to work, or borrowing or selling certain assets.
A financial advisor can help redefine your new spending plan, and help you feel better informed about your financial options and more in control of your new situation.
Establish a separate financial presence
Establishing your own financial footprint in the aftermath of a divorce can help you take the first steps on your path forward.
A financial advisor can help determine whether you would benefit from having financial accounts in your own name — like checking, savings, investment or retirement accounts.
Help you build an emergency savings fund
Building a financial buffer can help give you confidence as you set a new course following a divorce. A financial advisor can recommend how much you should keep in your emergency fund based on your new situation, and help you balance your savings goal with other strategies you may have, like paying down debt, contributing to your retirement fund and financing changes to your lifestyle.
Re-evaluate retirement planning and Social Security
As you begin to rethink your budget, spending and savings in the wake of a divorce, your financial advisor can also help you re-evaluate your retirement strategy. This includes analyzing your current accounts, identifying whether your contributions are on track to help you retire when you planned and helping you make any necessary adjustments.
Your divorce may also impact the Social Security benefits you receive when you reach retirement age. If so, your advisor can help account for these potential fluctuations within your retirement plan.
Update your insurance coverage
Knowing your insurance policies sufficiently cover your changing needs may help you feel more secure following your divorce. Your financial advisor can review the types of insurance and coverage amounts that you had pre-divorce and help identify what you may need going forward.
Once you identify the insurance products you need, your advisor can also help build the cost of premiums into your new budget to help keep you on track.