5 quick Divorce financial tips: These five are only a starting point.
- Plan your cash flow and spending carefully. Do not over exaggerate. You and your spouse only have so much income between the two of you. Unless you can increase income you both will need to decrease some areas of spending simply because you are going from one household to two on the same income. Something has to give.
- Have a financial specialist experienced in divorce matters suggest ways for you and your spouse to save on taxes by utilizing head of household filing status when possible and the best use of dependency exemptions when children are involved. A financial specialist can also recommend tax saving strategies for spousal maintenance and/or child support.
- If existing debt is a problem consider using an accredited consumer credit counseling agency to help you set up a debt management plan. This does not affect your credit rating since you will still be repaying all of the debt. The agency will work to negotiate a lower interest rate with each of your creditors. You will make one payment to the consumer credit counseling agency. The monthly payment you make to the agency is often much less than the combination of the payments you were making before. The agency makes payments to each of the creditors for you. There is the potential to save a bundle in lower interest rates and in some cases no interest giving you the ability to pay off your debt earlier than you ever thought. Two such agencies in the Minneapolis Saint Paul area are Family Means and Lutheran Social Services and no you do not have to be Lutheran to utilize their services. In worst-case scenarios, bankruptcy may be a consideration. Both of these agencies provide bankruptcy counseling and are able to refer you to bankruptcy specialists if and as needed.
- If existing debt is a problem do not make it worse by adding to that debt. Find other ways such as sacrificing today for a better tomorrow, increasing income, lowering expenses or some combination of all these.
- With retirement assets, it is common for a financial specialist trained in divorce matters to help one spouse or in some cases both spouses recommend strategies to come up with down payments for new housing purchases. This usually involves the use of a Qualified Domestic Relations Order (QDRO). A portion of an employer retirement plan is awarded to the lower income spouse, income taxes on the distribution are planned for, and if the distribution is incident to a divorce the spouse awarded a portion of the employer retirement plan will avoid the pre 59 ½ early distribution penalty.
Utilize an experienced divorce financial planning specialist. They are your best resource for helping you keep more of your money in your family.
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