Figuring out post-divorce finances can be challenging but focusing on the basics and tackling important paperwork can help you start.
Going through a divorce isn’t easy—emotionally, mentally, or financially.
“There’s a mountain of work that comes with the process of separating your life from someone else,” says Heather Winston, assistant director of financial advice and planning at Principal®. “It doesn’t matter if you’ve been married a short time or a long time. As you move forward, life will come with big changes.”
Part of that change is accepting the time this process will take.
“Avoid immediate, knee-jerk decisions, especially when it comes to your pre- and post-divorce finances,” Winston says. “If you’re emotional, set things aside and come back to them. But do come back. It will take time and effort to match who you are now with your new financial life.”
Keep track of your progress offline: Download a printable version of this divorce checklist (PDF).
No matter where you are in the process, this step-by-step list can help you tackle money-related to-dos so you can move forward financially.
Start with the divorce finance basics.
Make a list of all assets.
Detail who keeps what. That list will help if you need to change ownership of anything.
Create a new budget.
List income and all expenses. Be slightly conservative with your spending for the time being, suggests Winston. Read more about creating a budget.
Establish and add to an emergency fund.
Right now, it’s not important how much you have; it’s important that you are consistently adding to an emergency fund to help with unexpected expenses such as car repairs. Learn more about emergency funds and how much you may need.
Contact professionals as needed.
While you already have a divorce lawyer, you may want add tax and financial professionals to your team, too. Family and friends are good places to start for recommendations.
Work through important documents, protection, and access.
If you do this, check with your divorce attorney about the court order you may need to implement a name change on certain types of accounts.
Contact the Social Security Administration at ssa.gov and your state’s driver’s license bureau; update a passport if needed at travel.state.gov.
In addition to closing joint accounts, open new ones in your name. Search online for high-interest savings options.
Check and update beneficiaries on any relevant policy or accounts, including life insurance and annuities. Many companies have these forms online. Read about considerations for choosing beneficiaries.
Credit cards, lines of credit, or loans that may have your name
Request new credit cards (with your new name), and a copy of your credit report (you can get one at annualcreditreport.com) so you’re aware of (and can close) joint accounts.
Get updated copies of a mortgage deed from your county recorder to ensure your new name is correct. If you’re retaining a home, you may need to begin the refinance process.
Property and car insurance
Ensure your coverage matches the list of assets you retain by contacting your insurance agent.
If you’re transitioning from one policy to the next, you can get temporary insurance up to 18 months through COBRA. Your previous insurer can help.
If you and a former spouse shared passwords on any site, you may want to change them. (We have some tips for keeping your accounts secure.)
Evaluate future needs and plans.
“You may need to reevaluate your retirement plan,” Winston says. “Divorce could push your expected retirement date out or require you to save even more than you had been to stay on track for retirement. This is an opportunity to reexamine what your retirement will be and how to fund it.”
If you and an ex are splitting a workplace retirement plan such as a 401(k), 403(b), or a pension plan, you’ll need a court-issued document called a qualified domestic relations order (QDRO). Your lawyer can help. Retain a copy and follow up on payouts or transfer of assets according to the divorce agreement. Learn more about a QRDO.
To transfer IRAs or other retirement accounts, provide the financial institution with a copy of the divorce settlement and any requested paperwork.
If you need cash now , ask your tax advisor about tax laws that impact withdrawals from a workplace retirement plan vs. an IRA.
It’s helpful to run new projections with your tax advisor in case you need to make withholding changes. Reminder: Since the start of 2019, alimony or separation payments made to a former spouse under a divorce agreement entered into after 2018 aren’t tax deductible.
Update your will and estate documents (that includes any health care-related documents, too). Read more about will and estate planning.
You can start building your own financial plan. If you have questions, a financial professional can help you figure out how much to save for retirement, and which adjustments to make.
Ending a marriage comes with so many considerations and your post-divorce finances are one piece of your life puzzle, Winston says. “It’s an emotionally charged time, and it takes organization and thoughtfulness to plan for the next stage of your journey.”
- Got a financial professional? They can help you navigate the financial steps of divorce. If not, find one near you.
- Have a retirement account from your employer with service through Principal®? Log in to principal.com to review what you might need to adjust after divorce. First time logging in? Create an account.