When many people think about divorce, they think about the emotional damage that it comes with. While it truly ruins emotions, this is not the end. Divorce has been shown to significantly have a negative effect on finances.

Due to this, you should arm yourself with divorce lawyers who will not only give you emotional support, but also protect your money so that you don’t lose too much of it.

Once you and your spouse say “I do,” everything you earn becomes part of your marital estate, unless it is protected by a prenuptial agreement or held in a trust.

So, if you do not have a prenuptial agreement, everything is on the table when you or your spouse file for divorce. To know what you stand to lose, the first financial step in any divorce is to create a balance sheet or a list of all your assets.

You should have a meeting with a financial advisor during or after your divorce to get your feet back on the ground since your divorce may affect each of the following:

Your budget

A normal divorce will result in the loss of half of your income streams because a two-income household will be reduced to a single income.

So, if you weren’t making any money before you married and were reliant on your spouse’s income, you could enter a zero-income household unless you have special conditions that allow you to get a portion of your spouse’s income after the divorce.

Government Accountability Office data shows that following a divorce, a woman’s family income reduces by an average of 41%, about twice as much as men’s. Dividing your marital assets will most likely usher in a new era for your finances, necessitating an adjustment to your budget.

You might argue that as a low-earning partner, you will get alimony but you should note that the vast majority of states now only award alimony on a rehabilitative basis.

In other words, if you’re of working age and have been a stay-at-home spouse during your marriage, most states now expect you to return to work following your divorce.

While you are considerably less likely to pay or receive spousal support than twenty years ago, child support remains a common divorce expense. Child support costs vary greatly by state. You should work with your child support attorney and ensure that you pay a manageable amount.

Your credit score

Your relationship status has no direct impact on your credit score; nonetheless, a divorce might influence many of your financial habits, indirectly lowering your credit score.

For example, it’s easy to forget to pay joint debt, such as a shared credit card, auto loan, or mortgage, throughout the divorce.

Even after a marital settlement, your ex-spouse may be held accountable for making certain payments. However, if your name is still associated with those accounts, any missed payments would lower your credit score.

It is also usual to be an authorized user on your spouse’s card. If your spouse removes you as an authorized user, your credit utilization ratio (the proportion of total credit available to you that you use) will increase as your overall credit limit decreases. That’s terrible since a high credit utilization ratio can significantly lower your credit score.

Checking your credit score regardless of your relationship status is prudent, but it is especially critical during and immediately following a divorce. Check your credit score and view your credit report, which will show you what loans and credit cards that are in your name.

Consider freezing your credit to reduce the impact of your divorce on your score. This way, new credit cannot be issued in your name while you are divorced, preventing a bitter ex-spouse from incurring “revenge debt” in your name.

You should also close joint accounts, but keep in mind that doing so will influence your credit utilization ratio and, as a result, your credit score.

You should get a credit card in your name well in advance of a prospective divorce. This not only allows you to establish a source of credit completely in your name, but it also protects you from your spouse cutting you off financially at the start of the divorce proceedings.

Your housing

When going through a divorce, it is customary for either you or your spouse to have to pay for new housing arrangements, and living alone can be costly. You’ll most likely be shopping for a property with one salary rather than two.

Moving houses might also have significant tax ramifications. If you are married and filing jointly, you can sell your primary house without paying capital gains tax on the first $500,000 of equity. However, if you divorce and then file as single, only the first $250,000 is exempt from capital gains tax. Consider a home with $500,000 in equity, which you or your ex-spouse decide to sell following a divorce.

That probably means a $40,000 tax bill. As a result, you could be better off selling your home before your divorce is finalized to take advantage of a significant tax break.

Your court costs

Divorces that make it to court are extremely expensive. If a courtroom divorce is necessary, be prepared to pay significant expenses. Divorcees who engage full-service lawyers pay a hefty price.

Using a neutral, third-party firm with trained financial experts can help you avoid the courtroom and potentially save you a lot of money in legal fees.

Remember that your lawyer is not a financial specialist and cannot give you financial advice. However, these experts can assist you and your spouse in working out an asset split plan outside of court.

By doing so, you will only have to pay family lawyers Fairfax VA to draft or certify the separation contract, rather than each party paying an attorney to barter over your shared financial assets for days or weeks.

Parting shot

When your marriage ends, you should not only be prepared for the emotional turmoil but also think about the financial ramifications it comes with.

You should note that the most financially simple divorces are completed amicably, with both parties communicating sympathetically. However, no matter how ugly your divorce becomes, you should be prepared for some frequent financial issues.