Sorting out your finances
…after your divorce might seem like a daunting task, especially if you are not used to it, but unfortunately it’s a necessary part of divorce. Both you and your ex need to know your living costs as part of the negotiating process and also to help make decisions about where to live next.
It’s helpful to break down sorting out your finances into some bite sized chunks, which will hopefully make it a bit more manageable…
Step One: Gather up your information.
It’s really helpful to have all your financial information together in one place so you know what’s coming in and what’s going out. If you’ve got a few debts you’ve been avoiding tackling, now is the time to take your head out of the sand. So, first step… any money documents you’ve got in piles, files, boxes, stuffed in drawers, get them all out and put them in one place. So bank statements, credit card statements, bills, mortgage statements, anything that relates to money, gather it all up. And if that’s all you do to start with, that’s a good way to begin.
Step Two: Protect yourself
Hopefully this won’t apply for most people, but if you think your ex is the type to clear out your joint bank accounts and max out your credit card, then you can offer yourself protection by calling the bank/ credit card company and doing one of two things – either freezing the account or asking that both signatures be required to withdraw money. Both of them come with the inconvenient side effect of making it harder for you to get money out, but if you decide that’s better than being exposed to losing it all, then make the call.
Step Three: Get to know your money situation
This is the big job but you don’t need to do it all at once! Sit down with that paperwork and take some time to find out what money you’ve got in what accounts, and what debts you have. Look at direct debits and standing orders, find out exactly how much your mortgage or rent is each month. You want to get a comprehensive idea of what money is coming in and what money is going out.
Sounds daunting? Take it one step at a time. Get a page up on your computer or a big piece of paper and add to it gradually.
Start with your income.
What money comes in every month? Your salary? Your ex’s salary? Benefits? Gifts? Do you have money coming in from anywhere else? Write it all down, or put it on a document on your computer if you have one.
Now look at your bills.
If you have a bank statement you can go through that and work out what your regular direct debits and standing orders are, or these will be listed out for you if you use online banking. Start with the biggies. Even if you just get as far as working out what your mortgage/ rent, council tax and utility bills cost then you’ve worked out a basic cost of living.
List your debts.
What do you pay off in loans and credit cards each month? Are these your debts or joint debts? If they are joint, you may want to make provision for paying these off in the financial settlement.
So far so good… now time to tot up your everyday costs.
What do you spend each month on food, running a car, the kids, your health, insurance, going out. You can use your bank statements to get an idea of this or just jot it down over the course of a month. For a full list of potential things you might regularly spend your money on, download a budget tool.
If you’ve done all of this, congratulations! You are now much more on top of your finances than the average Joe. The process may take you a few hours but with a full understanding of what it costs you to live, you will be able to discuss this with your ex or your solicitor. It gives you a starting position from which you can begin to negotiate your financial agreement.
Still overwhelmed? A financial advisor can help. Find out how to contact one HERE.
Feel free to comment below and tell us about what you found helpful when it came to sorting out your finances.