How to Manage Your Money During a Spousal Separation
When your marriage isn't working out, a separation might be in order. While you might not be certain whether you'll reconcile or move forward with a divorce, there is still an important matter that needs to be addressed together — your finances.
Dealing with finances in a separation can be messy and lead to a lot of arguments. Use these tips to help you and your spouse manage your money during a difficult time.
1. Don't Be Afraid to Get Help
If you and your spouse cannot sit down and talk about your finances without raising your voice, then seek help. A marriage counselor can help you hear each other out and keep the room calm.
Talking with a family law attorney can help you understand how costly a divorce can be and give you both a better idea of where you would be financially if you made your split official.
Finally, a financial adviser can provide insight on the ramifications of separation and divorce. The goal is to leave both of you in a stable financial situation if you do make your split final. Look for a financial adviser that has some experience dealing with separation or divorce cases. (See also: 5 Money Moves to Make the Moment You Decide to Get Divorced)
2. Establish a New Budget
It is important to establish a new budget together. For couples without children, this should be relatively easy. You should each be responsible for half of all shared bills, and agree to take care of your own food and shopping needs.
When children are involved or when one spouse does not earn income, then establishing a new budget can be tricky. You have to both admit that you cannot enjoy the same luxuries during this time of separation. Basic bills need to be paid, and of course, all of your children's needs should be met.
3. Aim for Financial Independence
Close as many accounts possible that contain both of your names. If you pay off and cancel credit cards in both of your names, it can protect you from taking on further debt if you move forward with divorce.
Having separate checking accounts can also make life easier. If both of you earn a paycheck, set up direct deposit into each of your own accounts.
4. Deal With Mutual Debt
If you decide to move forward with a divorce, know that your debt might be split down the middle along with your assets. Any debt, including student loan debt that was taken on after saying "I do," is considered mutual property. This means you can get stuck paying off debt that your spouse essentially racked up.
While you are still together, make it a goal to tackle your debt. Agree on an amount that each of you should pay toward the debt each month. If money is tight, try putting saving goals on hold for a few months.
If managing mutual debt payments is becoming a hard task for you, both of you can apply for a free or low-fee balance transfer card to split up the debt in your own name. You can do this with a personal loan, as well. The point is to split the debt and put it in each of your names so that you can eventually close out accounts that are in your shared name. This can prevent your spouse overusing a credit card for revenge purchases.
5. What About the House?
If your house is too expensive for either of you to keep separately, then you need to consider selling it. Taking your home into a divorce can be messy and complicated. A divorce can also put a tight deadline on both of you to sell your home, causing you to get less than the full value for it.
If you cannot sell your home for the value of the property, try renting it out to pay the mortgage payments. This can take a huge burden off your shared financial situation and you can wait to sell at a better time. If you end up staying together, your home is still there for you to live in.
If you both want to live in the house while separated, then you need to know your state's laws. When you file for a divorce, you will need to establish a point of separation. Some states count that point as when one spouse announces they want to pursue divorce, while other states require proof of living separately. (See also: Here's What Happens to a Mortgage in a Divorce)
Nothing about separation or divorce is ever simple. Every couple's situation will be different based on finances and personalities. Dealing with a hard spouse is not easy, but going through a divorce isn't always the quick fix that it appears to be, either.
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