Financial and legal decisions can compound the emotional difficulties of ending a marriage. But these decisions can have long-term consequences after your divorce when one income pays the expenses that were paid by two spousal incomes. Choosing the right financial options can help eliminate some financial problems.
Avoid being house poor
Having a strong emotional attachment to your house can be costly because one income may have to pay for a mortgage, taxes, and upkeep that both spouses paid. This can take 60 percent of a spouse’s income, on average, for larger homes.
Before reaching any decision on keeping your home, you should carefully review your financial situation. Other options include selling the home and jointly dividing the sales proceeds or trading the home for other assets.
Selecting the right assets
Assets such as savings accounts, investments, real estate, and retirement accounts have different taxes consequences and returns depending on a spouse’s needs and financial situation.
A retirement account, for example, may not be a preferred option for a younger spouse needing immediate income. Early withdrawals before retirement are penalized. Stocks, bonds and exchanged traded funds can provide immediate income if they are sold or pay dividend. But this income may be taxed.
Cost of living
Divorce usually re3quires living on one income. This may require a new budget and a different standard of living.
There are many ways to deal with this such as selecting a more affordable vehicle or finding a more affordable place to live. Other changes can also help reduce your monthly budget for a more affordable lifestyle.
Courts may order a spouse to pay this support, often referred to as alimony, after separation or during divorce. Alimony is different than child support and depends on the settlement agreement, the specific case and California legal requirements.
Spouses should not assume that spousal support is permanent. It can end if the payor spouses loses their job, suffers another serious financial loss, dies or under other circumstances.
Recipient spouses should prepare to return to work, even part-time. Put aside some money for an emergency fund in case your financial situation changes.
An attorney can help you consider your options and seek a settlement that meets your needs. Lawyers can also help assure that your rights are protected.