There are numerous elements to divorce, including emotional activities such as working through conflicts, negotiating settlements and making child custody arrangements. It may be easy for individuals to think that the only aspect of divorce relating to finances is the division of assets in the settlement. However, there are often significant financial consequences of ending a marriage. Financial planning for divorce includes more than just understanding the child support and alimony laws in Michigan. Individuals may benefit from several additional strategies and preparations for post-divorce money management.
A CNBC article states that pre-divorce financial planning is essential for both spouses regardless of which spouse makes more money or handles the household’s financial affairs. Before signing all the divorce paperwork, it is wise to create a post-divorce budget that accounts for alimony or child support payments as well as the potential change in household income. Drafting a comprehensive budget may make it easier to make decisions on where to live. Divorce may create complications for retirement savings accounts and Social Security, so an individual may want to revisit his or her investment plans and make modifications for the post-divorce budget.
Forbes states that one common financial mistake individuals make during divorce proceedings is rushing through the financial negotiations relating to the settlement. Because divorce negotiations often involve conflict and strong emotions, it may seem that completing the process quickly is best. However, making quick decisions on asset division may have negative consequences. For example, a “simple” arrangement where one spouse keeps the house and the other gets a cash payout may leave one person without immediate housing and the other without the liquid assets that may be necessary for an emergency. Taking time to make solid financial preparations prior to divorce may help an individual remain financially stable after the marriage ends.