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Of divorce and financial planning
Rishi Nathany | April 04, 2007
There is tremendous emotional turmoil when one is going through a divorce. However, one needs to remember to take proper financial decisions that determine one's future financial well-being and that of the children, as well. And balancing the two could be rather challenging.
For starters, the best way to balance the two is to take care of your emotions first, without which you will never be able to make sound financial decisions. While you might be adrift a sea of emotions, you also need to sift through them to stay focused on what could provide you happiness and, more importantly, security in the days to come.
So, it is important to have an idea about your entitlement to assets. For instance, if you have taken a home loan as a co-applicant and also are a co-owner of the residence then it is important that you should take a call on who will retain the house.
Since these financial issues may take some time, there is a general tendency to push through the processes as quickly as possible. This rush to wrap up the divorce, however, can force you to make hurried financial decisions.
As a result, you could be left with much less in your kitty than you would have actually got. It is always important to remember that your spouse would also be in equal hurry, if not more, to get the divorce through.
Moreover, there could be chances that you could get into litigation over property and money. Once you have some hold over your emotions, you should start concentrating on the financial and other practical aspects of your divorce, like custody of children, your future career, and so on. To do this, here are a few tips.
Cost of living shoots up as soon as you start living separately. So the first step should be to take a realistic view of how much money you and your children will need to maintain yourselves.
If you are not working, try to make a road map to get a career or restart one. Budget for divorce and legal costs, and ensure you have adequate funds to maintain yourself during this period.
Hiring a divorce lawyer is of paramount importance. But it also costs money. If you can, pursue a financial settlement out of court, since litigation can go on for years. If your spouse is reasonable, this should not be a problem.
However, before you do that, try to understand where you stand legally. If your spouse has been handling the family finances, you will need to get photocopies, if not originals, of all your family assets, loans, investments, properties, bank accounts, etc and make a list of them. If you feel that your spouse may not offer you a fair and amicable share of assets, it is all the more important to do so.
Many of your family assets may have hidden value, which you may not be able to assess. For example, the value of art and antiques, property, insurance policies, etc. can be grossly understated to you. If you are not financially savvy, get an expert to advise you, based on these documents.
Start educating yourself financially, by going through all the documents with your advisor.
If you have joint bank, locker and credit card accounts with your spouse, close them and open separate ones in your name.
Don't sign any blank documents and thoroughly read and keep a photocopy of all papers signed by you during divorce proceedings.
Change the nominee on all your insurance policies and investments, if your estranged spouse is the nominee. These are just a few tips that can help you get through the trauma of a divorce.
However, looking at the brighter side, things may turn out to be smoother. If your spouse is reasonable and so are you, the whole exercise can be completed without any pain.
However, you need to remember that having realistic expectations of what you can and should get will go a long way in making your life simpler. It is not necessary that you get half of all family assets.
Bargain hard and well, as this is your only chance, but do it sensibly, without prolonging it for years. Let go of small things, which are not so important to you. This might help make the settlement process smoother.
The whole concept and process of divorce is difficult for any person to go through. It is only second to grieving for a lost loved one. The divorce process might end in a couple of years, but its effects on you may last longer and change you as a person. How you balance your emotions and finances during that period will, to a great extent determine how self-sufficient and stable you are later.The writer is a Kolkata-based financial planner.