Considering a divorce? It’s a big decision that will change your life and your finances. Divorce is expensive in ways big and small, which is why the time to start financially preparing for a divorce is right now. Even if you are in the early planning stages of a divorce or aren’t sure whether you’ll eventually pull the divorce trigger, it’s still a good idea to start squirreling away extra funds just in case. If you do get a divorce, you’ll be glad for the financial cushion. If you decide to stay in your marriage, then you can always sock that extra money into your retirement fund.
The point is, you don’t want to call it quits on your marriage and realize you have nothing in the bank. Here are ten big reasons to start that “rainy day” fund (you can think of it as your “rainy day divorce fund”) right now.
More Reading: How to tell your spouse you want a divorce
1. The Divorce
Even in the best of circumstances, divorce is not cheap. And, let’s be honest, most of us aren’t going to get the best circumstances. According to a survey by Nolo.com, the average divorce costs $12,900. A big chunk of that amount comes from lawyers’ fees. If you and your spouse are able to put emotions aside and agree to an uncontested divorce, you could still be looking at $4,100 in costs, according to Nolo. One the cheapest divorce options is mediation, which costs, on average $970 and doesn’t include court and filing fees or legal counsel.
Either way, you look at it, you’ll be shelling out a big chunk of change to legally end your marriage.
More Reading: How much do I need to save for a divorce?
2. Just in Case Your Spouse Tries Something
In a perfect world, you and your spouse would be able to agree to a divorce in a respectful manner, each willing to play fair and wishing the other the best in their new life. Reality doesn’t work this way, and in certain sordid cases, angry or betrayed spouses will go to great lengths to “punish” their spouse. It isn’t unheard of for a vengeful spouse to cancel shared credit cards, freeze joint accounts, and even empty shared accounts.
You may be able to eventually regain access to your funds, but in the meantime, you’ll need living expenses. Make sure your rainy day divorce fund is in your name alone!
More Reading: How to close down joint accounts during a divorce
3. Deposit/Down Payment
One or both of you will be moving out as a result of the divorce. If you are the one packing your bags, you’ll need to come up with a deposit if you’re renting or a down payment if you want to buy your own place. Keep in mind that most rentals require first month’s rent and a security deposit. That security deposit usually equates to one month’s worth of rent. If you want to buy, you’ll usually need to come up with at least 10 percent of the home’s value for a down payment unless you qualify for a specialized loan, (like a VA loan).
4. All the Things You Didn’t Pay Before
If you were part of a two-income household before your divorce, your spouse may have covered a portion of your shared living costs. If your spouse was the main breadwinner, they probably covered a majority of the costs. Now that you are on your own, you’ll find that you are the one who has to pay for insurance, utilities, groceries, gas, subscriptions, memberships, and more. It’s a good idea to cut down where you can, but you’ll also have to budget for these new costs.
5. Buying Your Spouse Out
Dividing your property after a divorce is never easy. One of the hardest assets to split is the house. If you want to keep the house, you’ll need to pay your spouse their share of the equity. You may be able to do this by offering other assets, but if the split is uneven, you may have to make up the difference by simply buying out your spouse.
More Reading: Should I keep the house?
After all your assets are divided, you will likely notice certain “holes” in your share of the possessions. For example, maybe you kept the house and most of the furniture, but your spouse took the dining room table that’s been in their family for years or the RV that you loved to use for camping trips with your kids. Your rainy day divorce fund can help you replace these pieces, filling in those holes with new things that you love.
More reading: The four-step divorce financial recovery guide
7. Health Insurance
If you were on your spouse’s health insurance plan, you’ll need to replace your healthcare coverage after the divorce. The first place to look for a new plan is with your own employer. Chances are, if you were on your spouse’s policy, it was because they offered better, cheaper coverage, so get ready to pay higher premiums and co-pays. If your employer doesn’t offer insurance, check to see if your state has a health insurance exchange or search the federal healthcare exchange. You may also qualify for Medicare or Medicaid depending on your age and income.
8. Mental Health Expenses
Even if divorce is the right decision for you, that doesn’t mean it’s easy. You may struggle with anxiety, depression, guilt, or fear after ending your marriage or suffer trauma from your marriage. (There’s a reason you decided to end things.) If you are struggling to move on, seek professional help. Therapy can help you acknowledge and manage your feelings and provide you with coping mechanisms so that you can grow stronger and more confident with your new life.
Keep Reading: Working through the emotions of divorce
9. Pamper Money
Whether or not you feel therapy is the right choice for you, divorce is still an incredibly stressful and challenging experience. It may seem silly, but we encourage you to put a little money away for pampering. Give yourself the gift of a monthly massage or facial. Treat yourself to a fabulous dinner or go wine tasting or brewery hopping with friends. Sign up for that half-marathon or take a trip abroad. Do what you need to clear your mind, rest your soul, and give yourself the space to heal.
Keep reading: Moving past your fears in divorce
10. Schooling/Job Training
Your financial reality will change without your spouse’s income, especially if they were the primary breadwinner. If you foresee future financial struggles, now is the time to brush up on your career skills. Maybe it’s time to get that extra certification or degree or sign up for some trade courses. Increasing your skill level is a great way to make yourself more competitive so you can snag a promotion or get a better-paying job. (Or even get your first job.)
Why Money Matters
Stashing away a little money in the bank “just in case” can be a powerful boost to your confidence. Knowing you have a divorce rainy day fund can help you make the decision to leave if you are truly unhappy in your marriage. What else do you need to know to prepare for a divorce? Sign up for a Second Saturday Divorce Workshop near you to find out!