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3 Ways Divorce Can Alter Your Personal Finances

Everything you and your spouse make together is regarded as a part of your marital estate as soon as you say “I do,” unless prenuptial consent or a trust has been created to protect those earnings. Therefore, if you are lacking a prenup, and you or your spouse file for divorce, every single thing is on the table. Making a financial statement, or a record of all your assets, is the first financial move in any divorce because of this.

Caps Your Monthly Spending Limit

A two-income home will change into a one-income home during a regular divorce, eliminating half of your income streams. Therefore, if you had no income before being married and were reliant on your partner’s income, you might be moving into a household with no income unless you meet certain criteria that might allow you to get a part of your spouse’s earnings after the divorce. A woman’s household earnings decrease by 41% on average after a divorce, which is nearly twice as much as what males face. Nowadays, a large number of states merely grant alimony to aid with rehabilitation. Despite your financial situation before getting married, you’ll probably make less money after being divorced, and you might be unable to afford all you could afford before getting married.

Credit Score Will Be Affected Indirectly

Throughout the divorce, it’s simple to neglect to make the payments on a joint debt, such as a shared credit card, auto loan, or mortgage. Your ex-spouse may still be required to make some payments following a marital settlement. However, in case you still have your name on those accounts, any missed payments will result in a reduction in your credit score. Being an authorized subscriber on a card with your spouse is also typical. Your credit utilization ratio will increase as your total credit limit drops if your spouse excludes you as an authorized user. This is terrible news because a high credit utilization ratio can seriously harm your credit score.

Retirement Portfolio

Unless there’s a genuine prenup in place, your retirement savings may be regarded as community property or subject to equitable distribution depending on the state you reside in. Any retirement funds are regarded as joint earnings in states with community property laws and are split equally. Retirement savings will be divided equitably, though not necessarily equally, by the state’s courts in jurisdictions with equitable distribution laws.

If you and your ex-spouse were married for more than ten years, you may be eligible to receive up to fifty percent of the Social Security income earned by your spouse (and vice versa), provided you are still legally separated and have reached retirement age. Your ex-spouse will continue to get all of their benefits of Social Security and the government will make up the difference if they use this benefit; doing so has no impact on the amount of payments they will receive from Social Security.

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