How to Keep Divorce from Devastating Your Family Finances

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A former accountant and real-life divorced mother of two shows you how to make money matters work with your ex-spouse.

Getting divorced is a financial blow to any family. Even in the best of circumstances there are double the housing expenses because suddenly there are two homes to support, two phone bills, two cable bills, two water bills, and so on. When there are kids involved and split-family living becomes the lifestyle of choice for the foreseeable future, finances can get even stickier.

If you are on reasonable terms with your ex-spouse, there are ways to avoid common pitfalls of supporting your kids financially. If you are not, there are still limited actions you can take without having to involve the family lawyer, they just may not be as equitable.

Don’t use money as a manipulator. The children will be the only ones to suffer. If you have an agreeable divorce, consider consulting a financial planner together to set up the best situation possible for your kids. If your divorce is messy, talk to someone about setting up a trust where a neutral party has control from the very beginning.

Agree on how to handle day-to-day expenses. Who is going to write the check for swim team? How will shopping for birthdays and other holidays be done? Will you each contribute a certain amount? Who will buy the kids’ clothes? Will there be a primary party responsible for the kids’ expenses or will you divide costs based on activity (such as one parent handles medical expenses, the other handles childcare)?

Establish a savings account for each child. Agree to a set amount that you will each contribute regularly (monthly is ideal). That money will be available for unexpected expenses such as cheerleading camp or a band trip abroad. When those events come up, you’ll be able to deduct the amount from the savings account—with no arguing or financial distress on either party.

Depending on how you set it up, this same account can pay for swim lessons, braces, football practice, and other day-to-day expenses.

If possible, establish a credit card that allows both parents to sign on it. When you need to pay for something immediately, this card allows you to do so without having to track down the other parent for half the funds. You could also do something similar with a joint checking account for your kids. Keep in mind this will only work if both parties are fiscally responsible.

Sign up for a prepay lunch account if your school has it. Prepay programs, such as Mealpay Plus (www.mealpayplus.com) give notice if your child’s lunch account is running low—so your child doesn’t have to be home that night to notify you he is out of lunch money.

Start a college fund. This fund should be separate from the regular savings account and should not be touched as it is growing. Agree with your ex-spouse ahead of time of what the funds may be used for and how the money will be shared if your child doesn’t attend college.

Buy life insurance. Even if you and your ex aren’t on friendly terms, both parents should buy life insurance that will financially cover the remaining parent should one die. You can designate the money be put in a trust for your kids to be managed by whomever you choose, or have the money go directly to your ex-spouse. Work it through the same agent so the policy is similar on both sides.

Meet with a tax advisor. Often times you may claim Single/Head of Household if you have a dependent. It may be worth you splitting your dependents equally or sharing them by odd and even years.

Write a will. There is much more to a will than just who will take custody of the kids should you and your ex die. You both need to decide how you want your assets handled if you are not there to do it for the kids.

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