DIVORCE MEDIATION SERIES: A Step-by-Step Guide –How do I Remain Financially Stable?

Although there is not a linear process in choosing to divorce or to use a Divorce Mediator; in general, most people will cycle through similar steps.  This series focuses on the most common steps; regardless of the order in which you actually take them.

Today’s Blog post will focus on another step in considering Divorce Mediation: How do I Minimize the Financial Impact of Divorce?

One of the scariest things about divorce is the impact on your finances.  It is generally the case that both of you will have to adjust your standard of living as it is mathematically more expensive to run two households than one.  So, it is important to take steps to keep your finances in good shape while going through the divorce process.  One of the most expensive parts of a divorce is legal fees.  Many people mistakenly think that they will not get what is “fair” if they don’t hire an aggressive divorce lawyer.  As you may have heard, it is usually the lawyers that get the “fair” end of the deal, not you.  If you are facing a divorce, you are likely already feeling strong emotions.  The divorce litigation process can fuel those emotions and increase conflict.  This can lead to more legal battles, thus increasing the legal fees.

Using an alternative to litigation, such as divorce mediation, can help you manage your emotions and your finances.  Divorce mediation is significantly less expensive and can focus your time, energy, emotions and finances in a more positive direction.  You can discover more workable ways to make sure you both keep your finances intact and address debt.  For example:

  • Identify all of your assets and debts on one document and update current balances so you can have an informed idea of your entire financial picture
  • Run your credit report to identify all community debts for which you both may be liable
  • Work out a realistic budget for what your expenses will be after you have separated even if you have to guess on items (e.g., monthly rent, utilities)
  • Use this budget to re-examine your spending habits and see if there are places to cut back on expenses
  • Be realistic about your or your spouse’s ability to pay child support and/or spousal maintenance payments based on your respective budgets
  • Consider keeping retirement accounts intact and transferring other assets between you to avoid certain fees or taxes
  • Consider paying off unsecured debt, such as credit card debt with other assets before the divorce is finalized to protect your credit and help you start your new life with less debt
  • Think outside the box when it comes to deciding what to do with your house.  Maybe it makes sense to keep it jointly, rent it, or transfer it to one spouse instead of selling it or letting it go to foreclosure

There are many other creative ways to help you end up financially stable after a divorce.  A divorce mediator should be able to guide and support you in these decisions in a cost effective way.

Here is a good article on how to get through a divorce while keeping your finances in the best possible shape