How to untie financial planning for divorce – Press Enterprise


This year I meet many people who find themselves in the middle of a divorce, recently divorced or widowed. None of these people expected to be in this position.

But as is life, we cannot predict our future, and it can change at any time. The best we can do is plan for the unexpected so that the outcome is not financially devastating.

Ask yourself, would I be fine financially if my marital status changed?

Credit and debt management

When applying for a credit card, loan, or insurance, credit reporting companies create a record, called a credit report, with your name on it. Your payment history and the amount of credit you have are tracked throughout your lifetime.

Credit history is important because without a credit score above 720, it is difficult to finance or rent a new home. Credit card reporting agencies know that when a consumer has high balances on their credit card, their risk of default increases. The agency penalizes the consumer by lowering his credit score.

Know how many debts you have outstanding. Read your monthly statements to understand the terms and interest rates of your mortgage, car loans and credit cards. If you supported yourself, could you pay your debt?

It can take up to seven years for incorrect payment data to be removed from a credit report. Some negative credit issues, like bankruptcy, can last 10 years on a credit report.

Beware of investment accounts

The purpose of a quarterly investment statement is to help you understand how investments and retirement accounts are allocated and whether they are increasing or decreasing in value.

Your statement is a tool that helps you manage and maintain a portfolio.

Do you need to sell a stock that has lost value? Will you pay capital gains tax? Do stock investments lose value when the stock market goes up?

Review your statements and if anything doesn’t seem right, do some research or ask for help until you’re satisfied with the answer.

Saving for retirement

Delaying saving for retirement often means you’ll be doing well in your later years. There is no simple solution if you are in this situation.

If you’re over 50 and haven’t opened a retirement account or have one that’s dangerously underfunded, take the time to meet with a financial advisor now to set up a savings strategy. retirement.

Remember that in retirement, you will need assets and sources of income to maintain your standard of living.

Understand your benefits

Before survivor benefits are selected for your or your spouse’s pension, meet with a pension plan representative to ask questions. It is important that you and your spouse understand current survivor benefits. If the option chosen results in a reduction of the spousal benefit upon the death of your spouse, your financial future will be affected.

Also, meet with a Social Security representative. Understand your benefits, your spouse’s benefits, and the benefits available to you if your spouse dies or you divorce.

Be aware of insurance limits

Don’t assume that just because you’re paying for insurance, you’re sufficiently insured. Confirm with your insurance agent or financial advisor that the insurance will protect your assets. Life, disability and long-term care insurance can be relevant topics to discuss.

Also, review property and casualty insurance policies with your insurance agent to determine if coverage is sufficient. To minimize premiums, many home and auto insurance policyholders have very low liability coverage limits.

California only requires 15/30 automobile liability coverage, which insures you for $15,000 per person or a total of $30,000 per accident. If you have accumulated assets, this coverage is insufficient. Confirm that your policies’ liability coverage is high enough to protect your assets. Never assume this is the case.

Review tax returns

Filing taxes and paying taxes are not anyone’s favorite tasks. Collecting data to submit to the tax preparer is a chore in itself, and waiting for the results can be fraught with anxiety.

When your tax preparer calls and provides an update, good or bad, be sure to spend a few minutes reviewing the data before signing the return. If reading your tax returns is completely foreign to you, ask the tax preparer to explain the information you are reviewing.

You cannot prepare your own state and federal tax returns, but you will sign the documents and be responsible for accurately reporting the information they contain to tax reporting agencies. Whether you’re in a relationship or not, always spend time reviewing your final tax returns.

Learn to negotiate

Strong negotiation skills are beneficial when seeking a raise or promotion and when buying a home or a new vehicle. However, people are often intimidated by the prospect of having to negotiate.

Maybe your spouse has strong negotiation skills, so you never felt the need to develop yours. Spend time learning and practicing the key steps to honing this art. Fortunately, there are plenty of free resources available online. Successful negotiators learn to control the process, coming away with an outcome that feels fair and supportive of their goal.

Lease a vehicle instead of buying

When you lease a car, you will generally have lower monthly payments than if you financed a car with a loan. You can upgrade to a new car every two or three years by simply returning the car to the dealer at the end of your contract.

If you decide to keep the car when the contract has expired, you will have to refinance the debt or pay off the outstanding amount. Additionally, you will be penalized if you terminate your lease early, exceed the allotted annual mileage (usually 12,000 miles per year), or damage the vehicle through excessive wear and tear.

Before renting a car, understand that you are entering into a contract that has negative ramifications if you terminate it early.

Being more engaged and talking about your finances will not only boost your confidence, but also allow you to stay in control of your financial life, which is especially important if your life changes unexpectedly. Before making financial decisions that could negatively affect you in the long run, assess your financial situation, put your needs first, and learn to say “no” when it’s in your best interest.

Teri Parker is Vice President of CAPTRUST Financial Advisors. She has practiced in the area of ​​financial planning and investment management since 2000. Contact her by email at [email protected]


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