While getting divorced is a very difficult time, there are several other things that will change along with your marital status. You and your spouse’s finances will need to be divided during the divorce, but this is a great opportunity to evaluate your financial standing. Keep reading to learn more about how to change your financial plan when your marital status changes.
Divorce is difficult because you are typically changing from a dual income household to a single income household. There may be alimony and/or child support payments involved, whether that is paying or receiving. Your short-term and long-term financial goals will change. Many changes will occur but if you take the right steps, you can make altering your financial plan easier.
Step 1: Figure out your living expenses
With your new income, you need to have a new budget. To formulate your budget, figure out all sources of your income to see what you are bringing in each month. Then develop a list of all expenses and debts you need to pay. Once you see the amount of money you have left over, you can begin to save it.
Step 2: Learn about your tax burden
Since you will now be filing as a single head of household as opposed to joint filing, you need to know your new tax bracket. Due to the division of assets, there will be changes on your tax return and what tax breaks you could qualify for. Understanding your tax standing will allow you to have an easier time around tax season.
Step 3: Update your insurance coverage
You will need to update your insurance coverage on your home, cars, and other insurance policies you may have. Be sure to reevaluate all insurance on your assets including boats, jewelry, and collectibles. Since assets will be changing ownership, there is no reason to pay for insurance on an asset you no longer own.
Step 4: Tackle estate planning
All wills, trusts, and other estate planning assets need to be edited. Your beneficiaries and heirs have most likely changed, which needs to be reflected in your estate planning documents.
Step 5: Research disability or critical illness insurance
As a single income household, if you are ever forced out of work you want to be covered. Having disability or critical illness insurance will be able to provide for you and your dependents in the case of an accident.
Consulting with a financial advisor can help you navigate your new financial situation and set you up for success. An advisor can provide quality knowledge and advice on what the best financial planning strategies are for you. Here at California Wealth Transitions, we are ready to assist you in developing a new comprehensive financial plan.