By Julia K. Pham, CFP®, AIF®, CDFA®, Wealth Advisor featured in Kiplinger
Understanding the process and getting solid advice can help you achieve a better outcome.
When people are getting ready to walk down the aisle to say “I do” to the person they want to spend the rest of their lives with, divorce is often a passing thought, an experience reserved for others. Many of us have heard the statistic that roughly half of all marriages in the U.S. end in divorce. That statistic still holds true for first marriages. But if you’re going through a divorce, statistics are irrelevant: It’s your life that’s being impacted.
If you find yourself in a position where your marriage is coming to an end, having a good understanding of the divorce process and key professionals to involve can help alleviate some feelings of anxiety. It is essential to carefully think about financial matters when going through a divorce. This decision is a huge one — and has consequences that will impact the trajectory of one’s financial future, family and retirement.
Over the years, I have helped advise dozens of people through their divorce, and I have found the following suggestions to be helpful.
1. Get organized.
Make sure you have an understanding of your assets, liabilities, income and expenses. Gather statements for each checking, savings, retirement and investment account and collect pertinent life insurance policies and documents on any property you own.
You should build an emergency fund, setting aside separate funds to pay for legal expenses related to the divorce. The national average cost of a divorce is $15,000. There are several factors that impact the cost, including the divorce method you choose and whether children are involved.
2. Understand the process.
One of the biggest things you should prepare yourself for: Often, the decision to get a divorce doesn’t immediately offer that sense of relief that you may be searching for. The process often takes months at the very least, up to years!
As I mentioned, the cost of divorce is often influenced by the method you choose. There are several methods, including litigation, collaborative divorce, mediation and DIY divorce. If your divorce is more amicable, you may want to consider mediation or a collaborative divorce, which involves you and your ex negotiating the divorce with professional help. In a collaborative divorce, each party hires their own team consisting of an attorney and sometimes a psychologist or financial specialist who will help negotiate the divorce.
