As much as you want to believe men and women are treated equally, it is not always true. Women still make on average less money than men. During a divorce, it also means women are impacted differently. According to a report by the U.S. Government Accountability Office, when women divorce, their average household income drops by 41 percent, which is almost double the amount men’s income drops.
However, there are some ways to prepare. Here are six steps to get you on the right financial path post-divorce.
Figure out your assets and debts
You may have paid the bills, or your soon-to-be ex might have handled it. Regardless, you might not have been in charge of all your finances. Now is the time to take stock of all your assets and your debts. Locate your mortgage statements, retirement accounts, bank accounts, investment accounts, credit card statements, business accounts and auto loans. Also collect documentation for student loans and any personal loans you may share.
It is best to pull full statements, rather than relying on your former partner to provide this information. That way you ensure the information is accurate and updated. Gathering these documents is important toassessing your financial picture.
Update or close joint accounts
If you shared bank accounts, close joint accounts, or remove one partner’s name from the account. One of you may be staying in the home, so you will also need to remove the other partner’s name from those bills. If you do not, the electric company will call you if your ex does not pay the bill. The same is true with other financial responsibilities. Having your name tied to your own bills ensures you are not responsible for any financial mistakes your ex makes in the future.
Review your budget
You may have a monthly budget, but if you do not, create one. Make a list of all your fixed expenses like the mortgage, internet, car loan and electric bill. Then include an estimate of expenses like your groceries, entertainment and clothing. You should also include a little extra money for emergency expenses, particularly if you are maintaining a home.
Compare your monthly expenses to your income. You may discover you cannot afford to pay the mortgage, or that you need to cut back on other expenses, like entertainment, your car loan or even your morning latte. You may also qualify for spousal support or child support, which will help with your expenses.
Think about your long-term goals
Now that you assessed your assets, debts and budget—you have a clear picture of your finances. You should decide your long-term goals. According to The Balance, deciding whether you want to maintain your current lifestyle or focus on financial security changes the kind of assets you request in the divorce settlement. Maybe keeping the house is not wise financially for the long run. You should also be careful handing over retirement or investment funds. These accounts have different tax and appreciation values than other accounts.
Build your own credit history
Start by pulling your credit report. Assess your credit score. If it is very low, you will have a hard time securing loans or finding new housing. You can build your credit by opening a card in your name, charging only what you can afford to pay off and then paying it off every month on time. Even paying your other monthly bills in a timely fashion helps your credit score.
Consider seeking professional help
You may feel overwhelmed by this process, and that is normal. Consider contacting a financial planner to help you create a budget and manage your finances. A family law attorney can also advise you whether you are eligible for spousal support, or what kind of assets you should ask for in the settlement. Many people also benefit from speaking to therapist to overcome the emotional trauma of a divorce.
With a little planning, you can make a smart financial start to your new future.