Divorce can be costly. Aside from the fees involved, you will need to split the assets you share with your spouse. Yet, it might not all be bad news where your finances are concerned.
Money differences are one of the main reasons for conflict in marriages. Ending your relationship gives you a chance to control your finances and handle things as you want.
How can you use divorce to your financial advantage?
Divorce is the ideal time to think about what you want in life. When you make one big change, it can be easy to make other changes to help you gain financial freedom. Here are some to consider:
- Withdraw from a retirement account penalty-free: Retirement accounts usually penalize early withdrawal. The one time you may be able to take money out without penalty is during a divorce. If a court awards you a share of your partner’s retirement account, you can use a qualified domestic relations order (QDRO) to access it now. You can then invest the money how you choose.
- Sell the house and downsize: If you live in a large family home, you may decide to sell it when you divorce, especially if the kids have moved out. Your share of the proceeds may be enough to buy a modest property in a less expensive location with money to spare.
- Reduce your budget: Couples often spend money to overcome their boredom. It is easy to think that a luxury vacation, an expensive meal out or a new kitchen will make you happy. Before you know it, you are spending thousands each year to ease the pain of living together. However, when you separate, you may find you are happy staying in with a good book or spending the holidays at your parent’s house instead of a luxury resort.
Ensuring you get a fair financial settlement from your divorce will allow you to start your new life on a sound footing. Understanding the laws that dictate how marital property is divided can help you make informed decisions about your future.