Separating from a spouse and going through divorce proceedings can place an emotional and mental strain on all parties involved. During this period, managing finances and budgeting efficiently is critical, and money management skills may play a role in whether individuals emerge from divorce in a healthy or weak financial position.
There are several financial categories upon which divorcing couples will need to reach an agreement. The first, and perhaps most important, involves credit-related accounts that impact their credit scores equally. This includes jointly-held credit cards, loans and mortgages. Each party has a stake in paying off balances or reaching a decision on which spouse will manage the account, because both of their credit scores will be impacted. For this reason, couples may benefit from quickly paying off credit accounts and transferring joint auto loans or mortgages to one spouse after a court agreement has been reached.
Divorce can create a great deal of uncertainty about which spouse is entitled to bank accounts, investments and other income sources. Until these issues are decided, it is crucial that individuals abide by a budget that focuses on paying off accounts and saving money. As both parties may find their incomes reduced, learning to live on less early on can help them acclimate to their new financial circumstances.
Taking care of children’s needs
In addition to financial accounts, spouses should also come to an agreement on their children’s needs and the financial products associated with them. For example, ensuring that children remain covered under health insurance plans is crucial even if one spouse is being removed from their spouse’s plan, Fox Business reports. Parents may also want to negotiate which will pay for out-of-pocket medical needs, or decide to split these costs.
Reaching a child support agreement that will ensure the additional needs of children are met is also important. This may include back-to-school shopping costs, sports or extracurricular fees, summer camp, college bills and other associated costs. By making these decisions early on and outlining them in the divorce agreement, parents can ensure that they emerge from proceedings with financial stability and the income to jointly support children.