| 10 steps to a money-smart divorce |
| By Jay
MacDonald
• Bankrate.com |
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When your marriage breaks up, the
last thing you feel like doing is crunching numbers. You're hurt,
perhaps angry, and possibly overwhelmed with anxiety, fear and despair.
You're focused on the past and present, not the future.
But as many divorced couples learn the hard way, this
is precisely the time you need to get a grip and pay close attention
to your assets and your financial future, lest both slip away in
the flood of emotion.
"First and foremost, it's a business deal,"
says Gayle Rosenwald Smith, a Philadelphia family lawyer and author
of "Divorce and Money: Everything You Need to Know." "That
means you've got to get rid of your emotion any way you need to,
whether through therapy or going to a gym. Because your divorce
should be based on one thing: your property settlement. It's a matter
of numbers, that's all it is."
Financial educator Ruth Hayden, author of "For
Richer, Not Poorer: The Money Book for Couples," agrees, but
admits that's easier said than done.
"At least 80 percent of money is about self-management,
about emotions, and 20 percent is about quantifying and computing,"
she says. "The counting part is easy; it's the emotional part
that's hard."
Since money is a major cause of divorce, it's safe
to assume that splitting the financial sheets won't be easy.
| Here are 10 steps to help you
cast off, steady your financial ship and set sail for
the solo voyage ahead. |
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| 10 steps to money-smart
divorce |
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1. Pull your
credit report.
"Pull your credit report before the divorce so that anything
in dispute can be resolved before the divorce is final," says
Hayden. There are three major credit reporting agencies: Experian,
TransUnion and Equifax. Be sure to get
a copy of your report from each of them. The reports are the
quickest and easiest way to get an overview of outstanding loan
balances, mortgages and credit card debt that you and your spouse
will eventually divvy up.
2.
Open individual bank, credit card and brokerage accounts.
You also need to do this before the breakup is official. It
will be easier to get a credit card and bank account in your own
name while you are still married and share joint assets and debt
on credit cards, mortgages and loans. Hayden says this is especially
important for women who have never established credit in their own
name. "It's easier for a 15-year-old to get a credit card than
it is for a 50-year-old divorced woman. She just gets deleted,"
Hayden says.
3. Close
all joint accounts.
A divorce can take time. To avoid acquiring additional joint
debt (or suddenly losing shared bank assets) during the legal process,
close your joint credit card and bank accounts. You will, however,
still be jointly responsible for paying off the balance of the closed
accounts. Cancel the accounts in writing and be sure to request
that they report each account as "closed by customer"
to the credit bureaus. Bankrate has form
letters that can help you do this.
Closing shared accounts is a critical step and one
that is too often overlooked, says Smith. The more you remain connected
to your ex-spouse financially, the more you are at risk. If possible,
pay off joint credit card balances by check from your individual
bank accounts or through balance transfers to your individual credit
card accounts.
"In a property-settlement agreement, couples
often split their debt. One person takes the MasterCard and another
the American Express. Well, that's an agreement between the two
of you, not between you and the credit card company," says
Smith. "What will happen is, one person declares bankruptcy
down the road and the credit card companies come after the other.
You might be better off each borrowing in your own name and each
paying off the credit cards so that you come out of the marriage
without any joint debt."
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