If you’re thinking about getting divorced, it is important that you be knowledgeable about your finances. Do you know what your spouse is earning? What is your money being spent on? Where are your assets located, and what are they worth? Are there liabilities in joint names that you might be on the hook for? Here are some first steps to get a handle on your financial life.
- Read Your Tax Returns. Reviewing your tax returns and the documents used to prepare them are a great way to get an overview of your financial situation. Tax returns contain information about your sources of income (like how much your spouse is making and how much interest and dividends you’re getting on your savings), the businesses your family has an interest in, the business deductions your spouse may be claiming, and the charitable donations you’re making. If anything doesn’t look right or if there’s anything you don’t understand, be sure to ask your spouse or your accountant “what” or “why.”
- Prepare a Balance Sheet. Take time to prepare a balance sheet that lists all of your assets and liabilities, whether the assets are titled in your name, your spouse’s name, jointly, or in the name of a trust or entity. This should include any interests in real property you have; all of your bank, investment, and retirement accounts; business interests; valuable items of tangible personal property like vehicles or artwork; and life insurance policies. Include information on how assets and liabilities are titled, the proper name of the asset/plan, and account numbers when appropriate.
- Create a Budget. If you aren’t the one who pays the bills, if your spouse has credit cards or accounts in his or her sole name, or if you use auto payments to pay your bills, you may not know where all of your money is going. Preparing a budget is a great way to find out whether your money is being spent wisely. Sit down to trace where your money is going. Then, take the next step and develop a plan about how you want to spend your money and whether you want to do more to save and build assets.
Your tax returns, your current balance sheet, and your budget will all help you take control of your financial destiny. If you decide to move forward with a divorce, be sure to bring these documents to your attorney to guide the discussion about achieving a fair financial resolution.