Post-Divorce Budgeting Critical to Avoid Financial Hardship
When you decide to get divorced, there is likely to be an impact on your finances and what you can expect to live on post-divorce. If you do not plan properly, you are exposing yourself to suffering a financial calamity. This could include having insufficient funds to cover your mortgage payment, car payment, credit card balance, etc. This can then create a snowball effect where unpaid bills lead to a major hit on your credit score and may result in those unpaid accounts going into collections.
Again, you can avoid this by sitting down with your Houston divorce attorney and discussing your post-divorce financial future with an eye towards effective planning. Here are three issues you need to be cognizant of and plan for when getting your divorce finalized and moving on with your life post-divorce.
Issue No. 1 – Failing to Create a Monthly Budget
You need to compile a list of your anticipated fixed expenses (e.g., rent or mortgage payment, car payment, utilities, credit card bills, etc.) and your anticipated income. You should also factor in whether you will be paying or receiving alimony. This is critically important so you do not find yourself living paycheck-to-paycheck post-divorce. In addition to a monthly budget, you should have a long-term budget so you can properly prepare for future expenses such as paying for college for your children.
Issue No. 2 – Impact of Divorce on Your Retirement Benefits
Since Texas is a community property state, contributions made to your 401(k) or other retirement accounts are subject to equitable division. Any investment accounts will also be subject to division so the funds you may have set aside for a rainy day and the long-term future will likely be reduced as a result of the divorce.
Along with your own retirement accounts, your Social Security benefits could be affected by the divorce. For example, if you and your spouse were married for ten years or more, they could claim a portion of the Social Security benefits.
Issue No. 3 – Properly Accounting for Spousal Support and Child Support
Depending on the specific facts of your divorce, you could be looking at paying both alimony to your spouse and child support. You need to be prepared to make these payments. Failing to do so can have serious consequences in Texas. For example, failing to pay child support can result in you being unable to renew your vehicle registration.
There are also tax implications when it comes to the payment and receipt of alimony and child support. For example, if you are paying alimony to your spouse, you can deduct those payments from your taxes. However, child support payments are not tax deductible. Similarly, if you are receiving alimony from a spouse, it is important to remember to report these payments as income on your taxes.
Contact an Experienced Houston Divorce Attorney Today
Getting divorced can be an overwhelming and emotionally traumatic experience. The Houston law firm of Lindamood & Robinson, P.C. is here to help. We can help walk you through the potential financial risks after a divorce and work to get the divorce finalized in an expeditious manner.