The Financial Pros and Cons of Divorce: What to Expect

Divorce is not just an emotional and legal process; it is primarily a financial one. The financial implications of divorce can be overwhelming and complex, and it is essential to understand the potential pros and cons of divorce from a financial perspective. Here is a non-exclusive list of some of divorce's financial pros and cons and what to expect.

Pros:

1.       Freedom to Manage Your Own Finances

 One of the most significant financial pros of divorce is that you have the freedom to manage your own finances. When you were married, you likely shared bank accounts, credit cards, and investments, and the decision about such matters could have been made jointly or by the other spouse. But after a divorce, you have control over your own financial decisions.

2.       Potential for Increased Income

 If you were in a situation where your spouse was the primary breadwinner, getting a divorce may allow you to increase your income. Depending on your individual situation, you may be able to seek alimony (also known as maintenance in some jurisdictions) or child support payments to help you financially. Also, many people take this opportunity to change careers and start doing something they had always wanted to do. This can be very freeing and challenging at the same time.

3.       Elimination of Joint Debt

When you were married, you may have shared debt with your spouse. A divorce can help eliminate that debt, and you can work with your lawyer to ensure that any joint debts are divided fairly.

Cons:

1.       Legal Fees and Other Expenses

 Divorce can be expensive, and the legal fees and other expenses associated with the process can add up quickly. You will need to pay for a lawyer, court fees, and possibly other expenses such as appraisals or expert witness fees. If the divorce becomes contentious, there may be experts such as a Child and Family Investigator, psychologists, or divorce consultants necessary to complete the process.

2.       Division of Assets

In many divorces, dividing assets can be a contentious and emotional process. Depending on the laws in your state and the specific details of your situation, you may need to divide assets such as property, investments, and retirement accounts.

3.       Impact on Retirement Planning

Divorce can have a significant impact on retirement planning, particularly if you have been married for a long time. You may need to adjust your retirement savings goals and rethink your overall financial plan.

Overall, divorce is a complex process that has both financial pros and cons. It is important to understand the potential financial implications of divorce before making any decisions. Working with a financial advisor or divorce consultant and your lawyer can help you navigate the process and ensure that your financial interests are protected. The more eyes you have on this issue, the better off you will be. Here are some tips to help you manage your finances during a divorce:

1.       Create a Budget

 After a divorce, you will need to create a budget that reflects your new financial situation. Make a list of your monthly expenses and income, and adjust your spending as necessary.

2.       Focus on Your Credit Score

 Divorce can have a negative impact on your credit score, particularly if you have joint debts that are not paid on time. Make sure you understand your credit score and take steps to improve it if necessary.

3.       Consider Your Retirement Goals

 Divorce can have a significant impact on your retirement planning. This is especially true if the retirement assets have been divided between the parties. Make sure you have a clear understanding of your new retirement goals and adjust your savings strategy as necessary as soon as possible following the divorce.

4.       Work with Professionals

 During a divorce, it is important to work with a lawyer and a financial advisor who can help you navigate the process and protect your financial interests. Choose a Certified Divorce Financial Analyst if there is one in your area. A CDFA receives special training that can specifically be used to help those in divorce, rather than general knowledge for financial planning (although both specialties can be helpful).

In conclusion, divorce is a difficult and emotional process that can have a significant impact on your finances. By understanding the potential financial pros and cons of divorce and taking steps to protect your financial interests, you can navigate the process with confidence and ensure that you are on solid financial footing after the divorce is final.