Why Every Divorce Requires Careful Financial Planning

Financial Planning During a DivorceAlthough couples may resist working closely together to resolve certain issues, they must keep many bills paid while their divorces are pending. If each couple can create and honor a flexible budget for staying afloat until the process is over, they can greatly reduce the stress in their separate lives.

Budgets Help both Poor and Wealthy Families

When meeting with their lawyers, husbands and wives need to carefully list their monthly budgetary needs. Once those are established, they must decide if they will pay those bills by using current earnings or community assets. Neither party truly gains anything by trying to force the other person to suffer financially during divorce proceedings. If significant wealth is involved, this shouldn’t even be an issue.  

However if the net marital estate is in trouble, both parties may have to decide whether a bankruptcy filing will be necessary. Since courts want to see that available funds are being shared properly, it may be necessary to transfer funds from one spouse to the other on a regular basis during the divorce proceedings so that all basic bills can be paid on time.

Fairness and Financial Disclosure

All assets and liabilities must be discussed openly and honestly from the very start of the divorce proceedings. Otherwise, children may suffer when parents fail to deal fairly with each other. Family support payments (or “alimony”) can help prevent either spouse from becoming financially destitute during the divorce process. Courts never look favorably upon any spouse who tries to hide assets.

Plan for a Two-Step Budget Process

An initial budget can be agreed upon to cover expenses while the divorce is underway. Courts will allow changes to be made to this type of budget when necessary. Every bill regularly due each month must be listed, along with all child care needs and expenses. If separate residences will be maintained during the divorce, special housing allowances should be included.

Once the divorce proceedings are well underway, both parties must then meet with their attorneys to carefully work out a budget that will go into effect as soon as the proceedings have ended. Special provisions may be necessary, depending on which spouse is granted primary custody of the children.  Should any major financial problems persist, the parties may need to revisit the idea of filing for bankruptcy.