Managing money during a separation

The majority of people who divorce cite financial problems as a contributing factor. Ironically, the financial problems that result from divorce may be even more severe. While it may be hard for people involved in an emotionally-draining divorce to clearly think about their money, it is absolutely imperative.

The first financial action after separation is to pull a copy of your credit report. You will want to review entries carefully and either close all joint accounts or change them to individual accounts. Alert your secured lenders of your marital status and instruct them not to allow any changes without your permission. You may also want to “freeze” joint bank accounts or divide any funds into two individual bank accounts.

To avoid future problems, develop a plan to pay off your debts prior to your divorce. This is important because your divorce decree is an agreement between you and your spouse—not your creditors. The contracts you signed with your creditors cannot be changed by a divorce decree; therefore, whoever is responsible for the debt during the marriage may still be obligated after the divorce. Your responsibility will ultimately be dictated by state laws. Since state laws vary quite a bit, you may wish to discuss your rights with a reputable divorce attorney.

After your divorce is final, it is wise to allow time to pass before making any major financial decisions. In the meantime, there are a few things you should do in order to move forward financially.

Determine necessary financial tasks. Get a firm grasp on your financial situation. Determine a procedure to pay bills, make deposits and withdraws, get cash, and pay taxes.

Locate important documents. You will need to locate important papers such as tax returns, insurance policies, birth certificates, mortgage documents and social security cards.

Create a new spending plan. Changed circumstances call for a changed budget. Note differences in income and expenditures and adjust your spending accordingly.

Set goals. Most likely, your experience changed your financial priorities. Decide what you would like to do with your money and put a plan in place to make your goals a reality.

Most importantly, enlist the help and support from your family, friends, and community.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

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