How to Survive a Divorce Financially

Divorce can be one of the most challenging and emotionally charged experiences in life, often rivaling severe health crises in its intensity. During this difficult time, financial decisions can arise that will shape your future, yet it’s crucial not to let emotions dictate these choices. While family law attorneys play a valuable role, their primary responsibility is to finalize the divorce efficiently, often focusing on immediate goals rather than your long-term financial well-being. Quick decisions made outside the courtroom may feel practical in the moment but can lead to significant financial repercussions down the road. That’s why approaching these choices with a clear, fact-based mindset is essential.

The Importance of a Financial Advisor During Divorce

To ensure your financial future is safeguarded, consider working with a financial advisor alongside your attorney. Many advisors work on an hourly rate or a flat-fee basis, making it affordable to gain valuable insights during this critical period. With a team that includes both legal and financial expertise, you can make informed choices tailored to your goals. Like your attorney, a financial advisor is bound by a fiduciary duty to act in your best interest, providing unbiased, fact-based guidance to help you through the financial complexities of divorce.

Key Financial Considerations Before a Divorce Settlement

There are a few essential financial considerations to address before reaching a settlement:

1. Asset Liquidity: If you’re employed, you may be able to prioritize retirement accounts over liquid assets. However, both parties should evaluate their need for liquid funds, as emergency expenses can arise unexpectedly. Having 3-6 months of income in readily accessible assets like cash, CDs, or brokerage accounts can provide a cushion for the unexpected, especially if you're further from retirement.
2. Valuing Retirement vs. Liquid Assets: Liquid assets (savings accounts, CDs, brokerage accounts) generally offer more flexibility than retirement accounts, particularly for individuals far from retirement age. It’s often wise to focus on securing sufficient liquid assets as part of the settlement.
3. Alimony and Insurance Considerations: For individuals receiving alimony, it’s essential to arrange life insurance on your ex-spouse’s life to ensure alimony payments continue in the event of their passing. Additionally, a lesser-known yet crucial consideration is disability insurance. Without it, a disability affecting your ex-spouse’s ability to work could jeopardize your alimony payments. Ensuring court-ordered disability insurance can provide peace of mind should such a situation arise.

Planning for Life Post-Divorce

Your first step after deciding to divorce should be to review your financial profile with a trusted advisor, who can analyze your current financial position and project your situation post-divorce. This analysis can provide clarity around retirement planning, emergency funds, and long-term financial stability, helping you approach the future with confidence. Every divorce is unique, and a qualified advisor can tailor strategies to your needs, ensuring you make well-informed choices for a secure financial future.

In conclusion, with the right team in place, you can navigate the financial aspects of divorce with greater clarity and peace of mind. Working with both legal and financial professionals will help ensure that decisions made today support your well-being tomorrow.