Get Your Financial Documents Organized
Find a place where you are going to store your financial documents. If you are concerned about raising any red flags, you may want to store them with a family member or friend instead of in your home. You can get a small file box. If necessary, consider using a safety deposit box at a bank. Here is a list of items you may want to store there (some may not be relevant for your situation):
Birth certificates for you and your children
Social security cards
Mortgage and/or other loan documents
Credit card statements
Retirement account statements
If you need to request any of these documents and do not want them mailed to your home, set up a post office box.
Take a financial inventory
For some, you may know this as a statement of net worth or your personal balance sheet. Regardless of what you call it, I’m referring to a document that lists all of your assets (bank account, retirement accounts, real estate, business interests, valuables, etc.) and liabilities (loans, credit cards, and other debts). You may not have all of the information, but you’ll want to include all that you are aware of. Also, go ahead and identify accounts that you know exist even if you do not know the value.
Also, take an inventory of your insurance coverage. Insurance is an important way to protect yourself from major financial losses. Identify the types of insurance you have, the carrier, the owner of the policy, the benefits, and the beneficiaries.
Establish your own financial identity
For many who have been in a long-term relationship, it is common to have all of the finances combined. However, if you are planning to be on your own, it’s important to establish your own financial identity. This can feel like an overwhelming step for some, but it can also be incredibly empowering. For starters, you’ll want to get a bank account that is in your name. When opening an account in your name, be cautious regarding any mail that will be generated from opening the account. Again, you don’t want to draw any attention to your preparations. Banks do, however, require a physical address when opening an account, so while you can provide them with a post office box for mailing, you will need to provide a physical address in order to open the account.
Also, if you do not have a credit card that is in your name, be sure to open one. This is different from being an authorized user on someone else’s account. When you are an authorized user on someone else’s account, they can remove you from that account at any time. Also, you are not establishing your own credit history. If you are married, you will be able to use your household income to open a credit card even if you do not have your own income. Make small purchases with the credit card and pay the balance off in full each month in order to develop a solid history of making consistent payments. Good credit history is necessary for things like getting an apartment and/or a loan down the road.
Create a spending plan
Yes, you may also know this as a budget but let’s face it, many of us simply do not want to talk about budgeting.
Start with your income. Include your employment income as well as any other sources of income. If you are not currently working, do some research on jobs that you would be eligible for to determine your earnings potential. Glassdoor is a great resource for salary research. If you are using your home computer to do research, use a private browsing window or incognito tab on your browser, so the next person who uses your computer does not see what you have been researching.
In addition to your income, you’ll need to get a sense of your expenses. If you are leaving your relationship, your expenses will likely change substantially. Here are some categories to consider when thinking about your expenses:
Utilities (gas, electric, water, etc.)
We’ve previously written about why it’s critical not to underestimate your expenses when negotiating spousal and child support.
Compare your income and expenses
Here’s the tough part. How do your income and expenses compare? If your income is substantially higher than your expenses, that’s great! Unfortunately, that’s often not the case. Going from one household to two means a significant increase in expenses, so that may mean you need to determine ways to close the gap. In some cases, public assistance might be available to help you close the gap. In others, you may need to look at increasing the hours you work or taking on a second job to make ends meet. Regardless of where you stand, knowing your starting point will help you to determine the best way to move forward.
If you have taken these steps to create a solid financial foundation for yourself, congratulations! I recognize that leaving an abusive relationship is extremely difficult, both emotionally and practically. However, you are well on your way to being financially empowered. The next steps are a little different for everyone depending on the specifics of your particular situation. If you are contemplating divorce, I strongly encourage you to meet with a Certified Divorce Financial Analyst (CDFA) who can guide you through the process.
By Leah Hadley, AFC, CDFA