Increasing Your Money IQ: How To Gain Advantage During Your Divorce
Starting a divorce process can be terrifying especially for people who never really dealt with their family’s finances. One of the first questions you may be asked by an attorney is: what are your assets and debts? Then, you may be asked to come up with a budget for purposes of spousal support. And, of course, there is also figuring out your budget so that you can start your life in a divided household. It is very difficult to find your financial bearing if you never paid particular attention. Most people do not even understand their own pay stub let alone stock options or deferred compensation programs. A good attorney will guide you through the process; however, increasing your money IQ will give you an edge during your divorce process.
Understanding your balance sheet, i.e. your income and your expenses, as well as, your projected estimated expenses (i.e. expenses that will result from separating households and accounts) will greatly assist you and your attorney in establishing your needs for spousal support purposes. It will also put possible settlements in perspective.
Making a list of all your assets including each item’s encumbrance, year of acquisition, and estimated value will help you not only in preparing your preliminary declaration of disclosure but also characterize each asset.
Diving deeper into your assets will reveal exactly what it is that you own. For example, most people are grossly underestimating the value of their retirement accounts. The face value does not in many instances mean actual value. Life insurance policies often have a cash surrender value. Stock options carry value. Your accumulated sick and vacation days are worth a lot too. Understanding assets is crucial in your understanding of fair settlements.
Debts have a deeper meaning than just your balance on a credit card. Debts qualify as separate or community. Characterizing each debt can mean thousands of dollars back in your pocket at the end of the process. Tracing purchases during the marriage is important as well. For example, student loans are separate debts of the spouse that took the loans for his/her educational purposes; however, it the money was actually spent on community purposes or separate purposes of the other spouse, it may be reimbursable.
Your attorney or hired forensic accountant may explain money to you but it is always best to develop your own understanding. Each settlement offer will look a lot more concrete to you if you understand how your money works. It will help you protect your credit during the divorce process. So, go and explore your finances.