Splitting finances post divorce

You plan for your wedding,for your retirement,even for that special holiday. The one thing most of us do not plan for,or even think about,is divorce

Divorcethe word itself can make you cringe. The dissolution of marriage is a difficult phase of life. Everything you hold true about matrimony and companionship flies out of the window and all you think about is whos at fault. While the tension between the divorcing couples brews,one aspect that most separated spouses neglect is that of their finances.

Before the he says,she says begins,you need to remember that splitting the finances between couples who are about to legally separate can be and is usually a messy thing. There are ways to amicably sort the issue of finances. However,before you sort out the finer details,start with a few things:

Short term budget

All this while you have been following a budget that helped you manage needs for both your spouse and yourself. Once both of you have decided to separate,you need to create a short term budget that will take care of your needs till the separation is legal. While it may be difficult for you to do this,this step will help you streamline your individual expenses,and ensure that you dont add to the already long list of disagreements. Also,if you are able to sit down and prepare a budget,you will lay down the beginning of an amicable separation process.

List of all your assets

This list will give you a general idea as to how you want to split your current assets. Make sure you include all items including property,jewellery etc. that were purchased either one of you during your marriage. This will help you decide what you would want to own and what you would want to give away.

While the terms of who gets how much has to be decided by the couple,try to be fair when dividing assets between yourselves.

Identify your debts and liabilities

This could be a long list,especially in case of couples who rely on EMIs to fulfil their needs ranging from LCD TCV to car.

You may also have a joint home loan to repay. Once you have an idea about your total debt,both spouses need to understand how this debt will be shared. This can be extremely critical in cases where only one spouse is the breadwinner.

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Based on your discussion,try to arrive at a conclusion on the distribution of debts as well as debts which will continue to be repaid jointly.

Once the divorce proceedings are over,you need to start thinking of your future. Though re-starting your life would seem like a difficult task,you will have to take control of it sooner or later. Here are things you could start with:

Restructure

Some of your long term goals will no longer be applicable. Hence,take a clean sheet of paper and begin afresh by writing out a set of goals for your life ahead. Dont forget to include dreams that you were already working on,and can still be achieved. Your new financial plan will be an amalgamation of your old plan along with new goals.

Alimony and child care

If you are legally responsible to pay alimony and child care,start investing,as a separate goal. Try not to postpone these payments. The longer you wait,the tougher it becomes to create the adequate resources/reserves. The best way to tackle this,is to create a separate account and activate an auto debit from your account into this account. Defaulting in your child care support would be the last thing you would want to happen.

Reform your will

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Once your divorce is final,you need to ask yourself if you want to change the nominations in your will or other assets that declared your spouse as a nominee. Make sure you also do the same for your estate plans,insurance etc. Though you may feel that you will not recover from this pitfall of life,you need to pick yourself up and reclaim your life.

Author is CEO,Freedom Financial Planners