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3 tips for preparing your finances ahead of divorce

If ending your marriage is inevitable, fragile emotions will often wage war with common sense, so it helps to adopt a business-like attitude. Your primary goal is to come out of the divorce with a secure future, but your financial situation may seem overwhelming. The more familiar you are with your current income, liabilities and assets, the easier it will be to create a plan for your post-divorce life.

Here are three tips for preparing your finances for divorce and beyond.

1. Track income and expenses

As soon as you can after making the decision to divorce, start tracking your income and expenses. You may find it a tedious job, but you will need the information ahead of the property division process. The knowledge you gain will also help in constructing your post-divorce budget. Collect household bills for such items as food, utilities, home maintenance, child care, transportation, clothing and entertainment. Add to the list the accounts you share with your spouse, for example:

  • Bank account statements
  • Retirement account statements
  • Investment account statements
  • Mortgage, auto loan and personal loan documents
  • Credit card statements
  • Tax returns for the past three years

You will also need to make a list of marital and separate assets.

2. Adopt conservative spending habits

Once you know divorce is in the offing, avoid spending money for big-ticket items. Do not go on a spree with your credit cards. Approach any kind of spending from a conservative viewpoint. In fact, this will be good practice for life after divorce because you may need to downsize your lifestyle.

3. Postpone key financial decisions

As you face divorce, you may begin to think about the beneficiary changes you need to make to your will, retirement account or life insurance policy. Wait until the court sorts out issues with respect to such accounts and save making any changes until your divorce is final.

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