Going through a divorce can be anemotionally painful and difficulttime. While this experience isnever easy, it is important to think aboutthe financial consequences of separatingfrom a spouse. There isn't much you cando to be prepared emotionally for adivorce, but you can take the followingsteps to help to keep your finances inorder during this tough time:
• Compile paperwork. While paperworkmay be the last thing on your mind,it's important to gather all of your importantdocuments and financial statementsso you can see where you stand. Taking acomprehensive audit of your financialassets and liabilities is an important step.Having all of these items together willsave you time and headaches later.
• Look into your retirement assets. Ifyou and your spouse have been contributingto retirement plans—such as IRAs or401(k)s—during your marriage, you maybe entitled to a portion of your spouse'sretirement assets. Your divorce decree willspecify the details, but you'll want to beaware of what kinds of plans you bothhave and where these funds are held.
• Check your credit status. Whengoing through a divorce, your financeswill eventually be separated from yourspouse's. As a result, you'll want to getcopies of your credit report and check itfor any errors. If you do find any errors,you should promptly notify the creditreporting agencies. If your ex-spouse hascredit problems, you'll also want to writea letter of explanation to the reportingagency so it can be placed in your file. Inaddition, if you don't already possess acredit card of your own, you should getone so you can start establishing yourown credit history.
• Update your beneficiary designationsand estate plan. With any majorchange in your life, you should reviewyour beneficiary designations as well asyour estate plan to ensure that they arestill accurate. Because your spouse mayhave been your primary beneficiary, youshould reevaluate these decisions andconsider other alternatives.
• Determine your income needs.Your household income will likely havechanged, so you should take a close lookat your expenses, such as your mortgage,utility bills, food costs, and medicalexpenses. In addition, if you have children,there may be some educationalexpenses you should be prepared for aswell. By knowing how much incomeyou'll need on a monthly or yearly basis,you'll be better prepared to allocateyour money and plan for upcomingfinancial expenses.
• Review your investment portfolio.Your financial goals, risk tolerance, andtime horizon may have changed alongwith your marital status, and your portfolioshould reflect your new circumstances.You should work with yourfinancial consultant to implement anyimmediate adjustments, and look intoyour overall plan for the future. You mayalso need to reevaluate prior decisions tomake sure your investments will stillmeet your updated goals.
Joseph F. Lagowski is vice president,investments, and a financialconsultant with AG Edwards inHillsborough, NJ. He welcomesquestions or comments at 800-288-0901 or www.agedwards.com/fc/joseph.lagowski. This article was providedby AG Edwards & Sons, Inc, member SIPC.