Your Finances: Can I Afford Divorce?

Can I afford a divorce?

It’s a common question people ask themselves when considering divorce. It might even be the most common question. 

It’s completely natural to feel overwhelmed when you start to consider the “what ifs” of divorce, especially with children and shared assets in the mix. 

But rest assured, you aren’t financially trapped. And there are some things you can do today to start planning and preparing for the financial impact of divorce.

Create a comprehensive budget and balance sheet

List your income and expenses, as well as assets (the house, retirement accounts, savings) and liabilities (mortgages, loans, credit cards). Seeing the numbers laid out side by side will help you understand what you can realistically afford post-divorce and where the shortfalls may be. 

To support you in this process, check out our worksheet, What You Own, What You Owe: An Inventory Of Assets And Liabilities, and our Divorce-Budget Template.

Decide: Keep or sell

Staying in the marital home can be comforting for the kids and you, but it can also be a costly decision. You need to compare your estimated expenses against your income. If it doesn’t pencil out, you might consider selling and splitting the proceeds, or even arranging a buyout if your spouse can assume full responsibility.

My Next Chapter’s legal expert, Renee Bauer, goes into more detail about this in her video, Keep Or Sell?: Reconsidering Your Real Estate.

Plan for the “cost of conflict”

This is a big one, and we talked at length about how to handle this in our roundtable event (catch the recording here). 

Litigation can be expensive — and prolonged fights over assets only amplify those costs. You might explore mediation or collaborative divorce: Both processes tend to be far more cost-effective and give you more control over the outcome.

For more on the various case resolution options available to you, check out our article by divorce attorney Renee Bauer.

Negotiate a fair settlement

If you have 401(k)s, pensions, or other qualified...