Money Moves During Divorce

Your Finances Are About to Get Dissected

Everything you own, owe, earn, and spend is about to go under a microscope. Both sides will exchange financial disclosures, and the court will divide assets based on your state's laws. That's either community property (50/50 split) or equitable distribution (fair but not necessarily equal).

You can't control the law. But you can control how prepared you are.

Step 1: Know Exactly What You Have

Before you can protect anything, you need a complete picture. Pull together:

• Bank accounts. Checking, savings, money market. Joint and individual.
• Retirement accounts. 401(k), IRA, pension. These are often the largest marital assets.
• Investment accounts. Brokerage, stock options, RSUs.
• Real estate. Your home, any rental properties, vacation properties. Know the mortgage balance and estimated market value.
• Debts. Credit cards, student loans, car loans, personal loans, mortgage. All of it.
• Insurance policies. Life, health, auto, umbrella. Know what you have and what it covers.
• Business interests. If you own a business or have equity in one, it will be valued and likely divided.

Make copies of everything. Statements, tax returns (last 3-5 years), pay stubs, loan documents. Store them somewhere secure that your spouse doesn't have access to, like a safety deposit box or a trusted family member's house.

Step 2: Understand Marital vs. Separate Property

Not everything gets split. Generally:

• Marital property is anything acquired during the marriage, regardless of whose name is on it. Her retirement account, your savings, the house you bought together. It's all on the table.
• Separate property is what you brought into the marriage or received individually through inheritance or gift. But here's the catch: if you commingled it (put inheritance money into a joint account, for example), it may have become marital property.

Talk to your lawyer about what's separate and what's not. This is one area where the details matter enormously.

Step 3: Build a Post-Divorce Budget

You're about to go from one household to two on roughly the same income. That math is brutal. Start planning now.

Figure out your post-divorce monthly expenses:

• Rent or mortgage on your own place
• Utilities, insurance, groceries
• Child support (estimate based on your state's formula)
• Possible spousal support
• Car payment, gas, maintenance
• Health insurance if you're losing coverage
• Savings and emergency fund contributions

Be honest with yourself. Most men underestimate what life costs on a single income. Running the numbers now prevents ugly surprises later.

Step 4: Stop Spending Emotionally

Divorce makes people do stupid things with money. Don't be that guy. Specifically:

• Don't buy a new car, new house, or anything major. Large purchases during divorce look terrible in court and drain resources you'll need.
• Don't rack up credit card debt. Marital debt gets divided too, and new debt complicates everything.
• Don't spend lavishly to "prove" you're fine. Nobody cares. Save your money.
• Don't stop paying bills. Missed mortgage payments or cancelled insurance policies hurt you, not her.

Step 5: Protect Your Credit

Your credit score is your financial identity after divorce. Protect it.

• Pull your credit report and review it for any accounts you didn't know about.
• Close joint credit cards or remove yourself as an authorized user. Talk to your lawyer first about the right way to do this.
• Open individual accounts if you don't already have them.
• Monitor your credit throughout the process. Sign up for a free service.

If she runs up a joint credit card during the divorce, you could be on the hook. Get ahead of this.

Step 6: Think About Taxes

Divorce changes your tax situation dramatically. A few things to consider:

• Your filing status changes the year your divorce is finalized.
• Who claims the kids as dependents? This is negotiable.
• Retirement account transfers need to be done via QDRO (Qualified Domestic Relations Order) to avoid tax penalties.
• Alimony tax treatment depends on when your divorce was finalized. For divorces after 2018, alimony isn't deductible for the payer or taxable for the receiver.

Get a CPA or tax advisor involved early. One bad tax move can cost you thousands.

Step 7: Think Long-Term

It's easy to focus on winning the divorce. Don't forget about winning the next ten years. Sometimes taking a slightly smaller settlement now in exchange for keeping your retirement account intact is the smarter play. Sometimes letting go of the house saves you from a mortgage you can barely afford.

Think about what you actually need, not what feels like winning.