Divorce can be summed up in one word devastating.

Putting aside the emotional distress, often times divorce takes a unaccountable toll on you financially. Divorce is not only the separating of a family, it is the separating of finances. Overnight many of your bills for staples such as electricity, cable TV and phones double since they are now not shared. Ironically, research has shown that most divorces occur due to financial distress; this problem is only compounded after the divorce.

Research also shows that both parties in a relationship often times do not have a good understanding of their current financial situation. I have found in my work that the majority of the couples that I consult with do not have a good clear understanding of what their net worth is, nor what their expenses are. Over the decades of being in this business and doing multiple financial analysis I have found that it is rare to find a couples that are prepared financially if their relationship ended in divorce.

Here is a list of things that I advise both parties in a marriage do immediately to have a better understanding of their current financial position:

  1. Make two lists. First, make one list of your monthly living expenses and another separate list for your expenses that hit annually. Then, plan out 15 years with those expenses growing at 5%.
  2. List all of your financial assets. Separate the list by assets that can be sold and turned into cash immediately and those that cannot. For the liquid assets place a value on them by using the value given from your statements. On the other assets place a realistic value.
  3. Putting any appreciation aside, list the amount of income that your derive from these investments. Then separately estimate any appreciation you might realize from your investments.
  4. Determine how much money you need to have reserved in cash, just in case you lose your employment income or your assets depreciate.

By doing these steps all couples will have a better understanding of what their current financial situation is. It is usually not a pleasant exercise, but often times very necessary.

Source by Ed Butowsky

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