A marriage breakup can leave a person with severe emotional scars that affect every aspect of their life. There are also consequential financial issues that will have immediate and potentially long-lasting effects for you and your family. 

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Financial concerns frequently emerge as the main sources of stress for people going through this difficult time because they have to figure out how to divide their joint assets and pay for the costs involved in the divorce while starting an entirely new life on their own.  

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Generally speaking, people fall into one of four categories when it comes to the financial effects of divorce:

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• Couples who part ways where finances are not an issue

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• Couples who choose to stay together for financial benefits after realizing the serious financial ramifications of divorcing

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• Couples who choose divorce without carefully weighing the financial implications 

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• Couples who are aware of the financial implications of divorce but are willing to part ways regardless of the cost

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If you belong to either of the last two categories, this article might be particularly useful. For those who haven't contemplated the monetary fallout from a divorce, now is an opportune time. 

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If you've examined the financial implications of both staying married and getting divorced and have chosen to move forward with ending your marriage but are still uncertain about the potential economic repercussions, it's high time to ponder life after divorce.

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Division And Distribution Of Marital Property?

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The task of dividing properties following a marital dissolution can be intricate and emotionally taxing. After deciding to end a marriage, couples are also faced with the challenge of deciding on the equitable distribution of their assets. This encompasses not just tangible property like houses, cars, savings accounts, investments, and personal possessions, but extends even to beloved pets. When divorcing couples have different ideas about what a fair division looks like, the allocation stage can quickly become one of the most contentious parts of the process.

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Most courts allocate properties using one of two principles: equitable distribution or communal property laws.

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1. Equitable distribution is used most commonly (including in most Colorado divorces) as it strives to fairly allocate resources by evaluating factors such as:

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• the financial circumstances of every person
• the efforts put forth during the course of matrimony, and
• prospective income capacity

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2. Community property regulations, used by some jurisdictions, require an equal division of any wealth acquired during a couple's marriage.

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To ensure an equitable distribution of assets during a divorce, spouses must disclose all liabilities and provide tangible evidence. Mediation or dialogue can help reduce disputes and legal costs. If a consensus cannot be reached, the legal system will make a final decision. An experienced divorce attorney is crucial for representing your interests and ensuring a fair outcome no matter how amicable or contentious your divorce may be.

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Identifying Marital Debt?

Dividing up assets and liabilities is an important part of getting a divorce, and it can have a major impact on the financial futures of both parties. When deciding how to divide up these debts among couples, the court takes many factors into account, such as:

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• the duration of the union
• the potential earnings of each partner
• their separate roles in accruing debt
• any pre-existing or marital agreements

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Divorcing couples can accurately determine total debt amounts and assign responsibilities by keeping important financial documents such as loan records, credit card bills, and mortgage contracts. Keep in mind that every divorce case is different. To protect one's rights during the allocation of financial responsibilities, it is essential to seek personalized legal advice.

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Post-Divorce Financial Planning

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When going through a divorce, one of the most important aspects is considering the financial impact on your daily life. Post-divorce financial considerations are crucial in determining your financial stability moving forward. One of the first things to assess is your income and expenses. 

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How Much Will It Cost You?

It is prudent to budget for potential post-divorce expenses. Although the specifics vary depending on the situation, there are some common factors to consider when preparing a budget for these potential costs.

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Living independently requires careful consideration of one's financial situation. It is important to make a budget that includes all of your monthly expenses. Using budget apps like Zeta, Rocket Money, or Honeydue to help track expenses is a great way to do this. While the following list is not comprehensive, it can serve as a good starting point. At the very least, your list of expenses should include:

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• rent or mortgage payments
• utilities 
• groceries
• transportation
• car insurance
• car payment
• phone bills
• clothing
• entertainment
• gas
• internet service
• And more…

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Another consideration is the cost of healthcare. If one partner was previously insured under the other's health scheme, they would need to secure their own coverage, which could prove costly.

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When estimating expenses after a divorce, it's essential to include the cost of legal representation and potential future obligations such as alimony or child maintenance.

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Consulting with professionals like financial advisors or attorneys is crucial for long-term planning. This guarantees that the divorce agreement takes into account and includes all required costs.

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What’s The Outcome Of Your Income?

Your income will likely be lower after your divorce. The U.S. Government Accountability Office found that divorced women lost 41% of their family income, while males lost 23%. Moreover, because most of your costs are no longer shared, your income may be stretched further. Thus, organizing and allocating finances are essential to covering your bills and daily expenses. Making a suitable plan of action and conducting a thorough assessment of your financial situation are essential steps to take. 

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Some people may be fortunate enough to have a steady flow of money from investment resources to help mitigate the financial burden of a divorce; however, the vast majority rely on their earnings to meet their day-to-day living expenses. Post-divorce income usually consists of three sources.

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1. Spousal Support:. This may serve as a solid financial foundation for you after you and your spouse are separated. Understanding the duration and financial value of such arrangements is essential for fiscal planning.

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2. Child Support: These contributions are critical not only for assisting the children, but also for evaluating overall income during this period of transition. 

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3. Jobs: If one was heavily dependent on a former spouse's income, it is important to assess potential earnings during divorce. It may be necessary to look for new job opportunities or pursue academic endeavors to improve one's capacity for creating stable sources of income. 

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Before finalizing any divorce settlement agreement, it is essential to understand your source of post-divorce income and determine how much money you will need to support you and your family. With a well-thought-out plan and a full understanding of your resources and income, you will be in a better position to negotiate a settlement that meets your present and future financial needs.

Are Your Taxes And Insurance Up-To-Date?

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Tax and insurance concerns can be intimidating, but that doesn’t mean they should be ignored. During marriage, joint filing was probably the norm for you, but following divorce, your status shifts to either a single individual or head of household. This change may alter your tax bracket, deductions, and credits. Working with a tax professional can help you understand your change in status and its implications.

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Also, if you were previously on your partner's health plan, you will need to get new insurance. To do this, you might need to buy a personal plan or sign up for a program through your employer. Reviewing any current life insurance plans that might need revisions may also be required. Given the change to your relationship's status, you may need to change who your beneficiaries are. Additionally, you will need to decide how to divide and joint home or auto insurance policies with your spouse or look for new coverage.

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Prepare For Your Short And Long-Term Future

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After a divorce, taking stock of your financial goals is vital for shaping your future to be what you want it to be! Take the time to assess your current financial situation, set attainable economic goals, and develop a comprehensive plan of action. This should involve:

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• budgeting 
• saving for retirement 
• debt management
• investment planning
• estate planning
• And more….

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It may take some time to adjust to your new financial situation, but by prioritizing your financial goals and developing a plan, you can ensure that you are on the right track. Don’t allow the trauma of divorce to leave you financially unprepared for your future.

Call New Leaf Family Today!

At New Leaf Family, we understand the devastation caused by divorce and how it can affect your financial future. That’s why, unlike most law firms, we offer a transparent and affordable approach to divorce. We don’t charge retainers or hourly fees; you will know exactly what your divorce will cost each month, allowing you to plan accordingly. You may be navigating divorce for the first time, but we are familiar with the challenges you are facing and can help you through them. Give our compassionate and experienced divorce lawyers a call today to learn more. Your initial consultation is free and confidential, so there is no reason not to contact us to get a professional opinion!