Divorce and Money: Navigating Finances During Separation

profile Brett Holzhauer  |  October 4, 2023

Divorce is a challenging and emotionally charged process that many experience each year. According to the CDC, nearly 700,000 couples decide to call it quits in 2021. And this process is far from easy. In fact, the Holmes-Rahe stress scale indicates that divorce is the second highest stressor for humans, right behind a spouse passing away.

A divorce can involve many facets, with one large aspect being the finances of the couple, and splitting them as directed. Aside from the significant life changes couples face during this process, navigating the financial aspects of it can be trying.

In this blog post, we will explore various aspects of managing money during a divorce, from understanding your financial situation to making informed decisions about assets and debts.

How To Financially Settle a Divorce

Financially settling a divorce is a crucial aspect of the process, and it requires careful planning and negotiation to ensure both parties achieve a fair and equitable outcome. Here are some steps to guide you through the process:


Both spouses should provide a comprehensive list of assets, debts, income, and expenses. This includes bank accounts, investments, real estate, retirement accounts, and any other financial holdings.

Valuing assets and liabilities

Determine the value of all marital assets, including real estate, vehicles, and personal property. Some assets may require professional appraisals to establish their worth accurately. Additionally, it's essential to assess all marital debts. This includes mortgages, credit card balances, loans, and any other financial obligations incurred during the marriage.

Spousal support and alimony

Consider the need for spousal support (alimony) and child support if applicable. Courts may calculate these based on factors such as income disparity, custody arrangements, and the needs of each spouse and child.

Tax Implications of divorce

Be aware of the tax consequences of your decision to end your marriage. For example, the sale of certain assets may trigger capital gains taxes. Consult with a tax professional to optimize your financial settlement.

Depending on your circumstances, it may be beneficial to hire a divorce attorney that can help you address your needs and wants. Speaking from experience, I didn’t need an attorney for my divorce in 2021 as my previous spouse and I agreed to divide things on our own.

However, it could be helpful to talk to a lawyer if you’re considering dissolving the marriage. They can provide guidance, ensure your rights are protected, and help negotiate a settlement that's in your best interest.

Draft a marriage settlement agreement

Once you've reached an agreement, put it in writing. The settlement agreement should detail all financial arrangements, property division, support obligations, and any other relevant terms.

Remember that every divorce is unique, and the financial settlement process may vary depending on your individual circumstances and local laws. It's crucial to prioritize open communication, fairness, and compromise to achieve a financial settlement that benefits both parties and sets the foundation for a stable post-divorce financial future.

How To Navigate Post-Divorce Finances

Navigating finances after a divorce can be challenging, but with careful planning and adjustments, you can regain financial stability and move forward confidently. Here are some key steps to help you navigate your finances post-divorce:

Assess Your Financial Situation: Start by taking stock of your current financial situation. Review your income, expenses, assets, and debts. Understand your new financial reality.

Create a Post-Divorce Budget

Develop a budget that reflects your changed circumstances. Account for all your expenses, including housing, utilities, insurance, groceries, and childcare, if applicable. Make sure your income covers these essential costs.

Update Financial Accounts

Close or separate joint bank accounts and credit cards. Open new accounts in your name to establish financial independence.

Review and update your will, beneficiaries on insurance policies and retirement accounts, and any other legal documents that need adjustment following the divorce.

Set Financial Goals

Define your short-term and long-term financial goals. These goals can help you stay focused and motivated as you rebuild your financial life.

These goals can include:

  • Build or replenish your emergency fund. Having savings set aside for unexpected expenses is crucial for financial stability.
  • Retirement Planning: Reassess your retirement plan and consider increasing contributions to catch up if necessary. Consult with a financial advisor to ensure you're on track for a secure retirement.
  • Debt Management: Develop a plan to pay off any debts incurred during the divorce. Prioritize high-interest debts and work on reducing them.
  • Insurance Coverage: Review your insurance needs, including health, life, and disability insurance. Ensure you have adequate coverage to protect yourself and your dependents.

The bottom line

Divorce can be a brutal process for many, and each step of the process can feel extremely overwhelming. So throughout this process, it’s extremely important to do needed self-care and stay balanced.

And once the marriage is officially ended, it could be a difficult road of rebuilding your life as a single person — especially financially. Do your absolute best from sliding into mounting debt, but also give yourself a break on maybe not being able to hit your financial goals in this season of your life. You can always take a pause and get back to your wealth building journey once you’ve navigated this process.

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