Most people find their finances have changed dramatically following a divorce. The money that in the past supported one household now must be stretched to support two. This is especially true if one party is paying spousal support to the other.
It may be helpful to work with a financial advisor or certified public accountant (CPA) to help you understand how you originally built wealth and to help you get back to the financial position you were in before the divorce.
Importance of Budgeting
You may have some tough conversations with your CPA as you go through a budgeting process. You need to identify exactly what your income and expenses are to establish a realistic budget. You may need to change your spending habits in order to rebuild your assets.
For example, you may not be able to take extravagant vacations like you used to. You will need to scale back. Instead of going to Las Vegas and staying at the Wynn Penthouse, you will have to get a regular room. Instead of ordering the A5 Wagyu steak, you will have to settle for a nice prime rib filet.
That may be an extreme example, but the point is to have a budget and live within that budget. Do not focus on the negative part of what you can no longer have, but on what you can have under the terms of the new budget.
Making Tangible Goals
If you can make a projection for your future, you can have an incentive to rebuild your assets. One way to do this is to sit down with your financial counselor and make tangible plans. If you can see that if you deposit a certain amount of money into a savings account, at a reasonable rate of return, in a defined period of time, you will have X dollars saved.
You can do the same thing with an investment account or your 401k. Set up an automatic withdrawal that sends an amount of your earnings to your investment account. If the money is gone from your account before you actually see it or have a chance to spend it, it will accumulate, and you will be gaining back the wealth that you lost in the divorce process.
From the Blog
Pre-Divorce Financial Checklist
It seems that in almost all cases of divorce, one party has been the one who handled the money and can readily provide necessary financial documents to legal counsel handling the divorce. The other party is often left in the dark and should sit down with the CPA who prepared the tax returns and go over the documents in order to discover the true financial situation. Here are some of the items that … [Read More...]
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