Being unprepared to handle common post-divorce expenses can result in a financial nightmare after you finalize the dissolution of your marriage. Today, we're giving you the rundown on what you need to budget for during and after your divorce.
Common Post-Divorce Expenses You Need to Budget for
If you're going through a divorce, the last thing you probably want to think about is your budget—but you can't afford to ignore the costs that often come after a divorce (literally).
Being unprepared to handle common divorce expenses can result in a financial nightmare after you finalize the dissolution of your marriage. The average cost of a divorce in the US is currently around $15,000. With that kind of a price tag, budgeting for your divorce ahead of time can go a long way towards helping you stay financially stable during and after your divorce.
Today, we're giving you the rundown on what you need to budget for during and after your divorce.
The "Big One"—Housing Post-Divorce
For many divorcees, housing is the most significant post-divorce expense. Even if you plan on keeping the marital home, you may be hit with unexpected costs.
How you handle housing during and after your divorce largely depends on what you and your soon-to-be-ex intend to do with the marital home. Some couples elect to sell their home and split the profits. However, depending on the circumstances of your divorce, one party may want to keep the home.
For example, if you share children, the custodial parent (who the children will spend the majority of their time with post-divorce) may want to keep the home to make the divorce less painful for the kids and make caring for them easier.
If you plan to move out during or after your divorce, you should:
- Think about whether you want to move post-divorce. Divorce can be a great opportunity to get a fresh start in a new city or even a new country, especially if you don't have kids. If there's a location that would be better for you professionally or somewhere you've always wanted to live, now's the time to explore that opportunity.
- Start exploring your options. Figure out how much apartments and houses are going for where you want to live. Keep in mind that the price of real estate can fluctuate depending on the time of year—it may be worth getting a shorter lease so you can renegotiate for a lower price in the winter when lease prices usually drop.
- Join housing communities. Most cities and real estate markets have communities online—Facebook groups, subreddits, forums, etc.—where residents help each other find housing. Joining those groups can help you find a great place for a budget price.
- Figure out if you'll need to pay a capital gains tax on your old place. Many people get hit with an unexpected capital gains tax after selling their house or apartment. Talk with your realtor and see if that's something you should budget for.
- Overestimate your expenses. It's always wise to overestimate how much finding new housing will cost. Worst-case scenario, you end up with some savings. There are always unexpected costs when moving into a new place—delivery costs for furnishings, essential items like tools, security deposits, etc.—so give yourself some cushion when budgeting for the move.
If you plan on keeping the marital home or apartment, you should:
- Come up with a plan for how you'll pay for the rent or mortgage by yourself. Depending on the size of your house, you may also have to pay an estate tax.
- Think about how your divorce will affect your housing situation. Will your ex help pay for the house with alimony or child support? If you share a child, how much time will you need to set aside for exchanging custody? Preparing for these details in advance can help reduce the economic and emotional impact of the divorce.
- Think about what your ex is taking (and how much it will cost to replace it). Your ex will probably take some items with them when they leave. Figuring out how much it will cost to replace items can help you look for sales and grab what you need at budget prices.
How Will Legal Contracts You're Engaged in Change Post-Divorce?
Many people underestimate how a divorce may impact various contracts they're engaged in.
For example, let's say you and your spouse buy a car together when you get married, but only one of you puts your name on the title (something that's fairly common). Chances are, the person who's not on the title will have to refinance their car loan post-divorce. That might mean increased payments and a longer-term agreement, which can end up costing hundreds or even thousands of dollars.
Additionally, if you share legal contracts—like loans one party co-signed on—you may have to pay off those loans before you get divorced.
Insurance changes are another big unexpected cost associated with divorce. Most insurance providers offer discounts on shared plans, which most married couples take advantage of. Post-divorce, you'll need to transition to single-payer contracts, which usually cost more to maintain.
You should also look out for how divorce might change your media plans. If you share a phone plan with your soon-to-be-ex, for example, you'll probably need to pay to separate your plan—which can be surprisingly expensive.
Think About How Divorce Will Impact Your Accounts
Various financial accounts, such as shared investment accounts, 401ks, retirement plans, etc., may be split during the property division process.
Losing half of your investments or retirement savings can be a huge financial impact many divorcees are totally unprepared for. You should work with a financial professional like a Certified Public Accountant (CPA) to figure out how your divorce might impact various financial accounts you own, and what you can do to offset those costs.
If You Have Children, Expect Costs for Your Divorce to Increase Significantly
Children are often the costliest part of a divorce.
If you and your ex disagree on how to handle child custody, you'll need to engage in a custody battle that can be incredibly cost-prohibitive. Even if you agree on a custody arrangement, you'll still need to pay various costs childless divorcees won't incur.
For example, both you and your ex will need to buy various items (extra furnishings, media equipment, etc.) so your children have the same quality of life no matter who they live with. Additionally, costs that you once split, like food, will need to be paid for separately. Finally, you may need to mix up your strategy for how you each split costs like your child's health insurance and medical care, extracurricular activities, etc.
Our Divorce & Family Law Attorneys—Supporting You Through Divorce
Divorce is never easy. But having the right divorce lawyer by your side can help you navigate your divorce with confidence and prepare for a happier, healthier life post-divorce.
At Orshan, Spann & Fernandez-Mesa, Family Law Attorneys, we fight for our clients, helping them pursue their best interests during the divorce process.
To schedule a consultation with our team or learn more about how we can help you navigate your divorce, contact us online or via phone at (305) 853-9161.