The divorce process can be a stressful, traumatic and expensive time. In order to make it through the break up, you have to be stronger and more focused than before. Remember, for anyone going through a break up, divorce can be painful, but it does not define you. Rather, it is an opportunity to start a new beginning. In the meanwhile, you can follow these budgeting tips to manage your finances though this difficult time.
Prioritize The Essentials
Above all, you need to prioritize the essentials when going through a divorce. There can be a lot of emotional and legal distractions. Start with the basics of food, shelter, clothing and transportation. If you have the essential expenses covered, you are much more likely to think clearly about other decisions. Moreover, you will have the confidence to keep your family safe and healthy during a period of change.
Prepare Property Value Appraisals
Once the essentials are covered, it’s time to evaluate what assets you have. You might own a house, cars, furniture, equipment, etc. Take an inventory of the assets and their value. If you can’t come to a realistic amount together, then consider hiring an appraiser. Surely, a home appraisal can make the largest impact on the assets’ overall value. Thus, take the time required to properly assess your property value.
Divide Your Assets Evenly
Next, dividing your assets evenly can be the hardest part. Since one individual is used to giving more, it’s common that someone gets taken advantage of. Whether you are the financial supporter or not, try to divide your assets evenly. If possible, you should make the division very fair to avoid resentment or guilt in the future. When the time comes to file the divorce, your asset division will play a crucial role in how you manage your finances.
Budget To Cover Alimony Costs
After coming to agreement on the financial divisions, you still may have to pay alimony. Typically, divorces include a spousal support obligation in the form of monthly payments or a lump sum. You should budget for the alimony costs based on your current salary or how long you have not worked. While most people will argue over this payment, you should budget for a best and worst case scenario. Hopefully, your attorney with settle the alimony agreement in your favor.
Estimate Tax Implications
Moreover, there can be serious tax implications to a divorce. When you decide to sell a house or major assets, they will be taxed. Any alimony income is taxed. However, any transfer of properties could be tax free during the initial stages after the divorce. While doing your budgeting for the divorce, keep a running list of changes that will impact your tax obligation in the upcoming year.
Of course, divorce costs a lot, financially and emotionally. You have to stay focused on what is really important, meeting you and your family’s living needs. With all the basics covered, you can then plan for the financial implications of your asset evaluation, dividing them and then paying for any alimony or support. Finally, you should carefully plan any tax obligations that would result from any divorce changes. If you follow these steps, you will have a much smoother process for managing your finances through a divorce.