4 Steps to Take as Soon as You Say ‘I Don’t’

The end of 2011 seemed to be all about the end of marriages. Last week alone, Newt Gingrich had to revisit his first divorce right before the Iowa caucuses, Mel Gibson lost half his $850 million fortune to his ex, Maria Shriver was rumored to be reconsidering her divorce from cheating hubby Arnold Schwarzenegger, and a 99-year-old man in Italy divorced his wife after learning she had an affair – in the 1940s.

When a good friend of mine went through a divorce last year, it didn’t make headlines, but it did make for tough times. She thought she was headed toward an amicable settlement. But as often happens, emotions ran high, and what started out as a seemingly easy split ended up being a financial disaster – one she’s still dealing with today.

There’s no shortage of divorce advice on the Internet and from attorneys. Some is good, some bad. But here’s what worked for my friend – and what she wished she would’ve done sooner. Take these steps to protect your newly single self…

1. Separate your bank accounts

At the beginning of my friend’s divorce, she decided to leave their joint checking account open because she didn’t want to seem spiteful. Unfortunately, her soon-to-be-ex-husband wasn’t too concerned with appearances. He cleaned out the checking account and her linked savings account – which she only found out about after having her debit card denied at a restaurant.

If you asked her now, she’d tell you it’s better to separate the checking accounts and deal with the fallout. Sure, her ex would’ve been angry when it happened, but they could have saved themselves a lot of fighting (privately and in court) had they just separated their money from the beginning. After all, she had to deal with a financial crisis, and her ex ended up having to pay back everything he took anyway.

When you decide to make the split, Kiplinger suggests withdrawing half the money from any joint accounts and placing it in your own checking account. And if you don’t have one already, see our banking page for tips on finding the right checking account.

2. Protect your credit

Those credit scores you spent years building will go kablooey the second your ex decides to go on a shopping spree and ignores the bill. You need to separate your credit and loan accounts quickly.

You may know all of your credit information, but you should still look at an official report. Order a copy of all three credit reports – TransUnion, Experian, and Equifax – and go over them carefully. Highlight the names and numbers of each creditor you share with your spouse.

While it may be the last thing you want to do, discuss credit accounts with your ex. Decide who keeps what and ensure both of you still have an open line of credit in case of an emergency.

Unfortunately, turning joint debts into single debts isn’t easy. You can’t just call the lender and ask to have a name removed. It generally means either paying off the debt, or having one party reapply and refinance it in their name alone. If they can’t qualify, the debt should be paid off, even if it means selling the house, the car or using assets to pay off the credit card.

The dumbest thing you can do is sign over ownership of an asset like a house or car, but leave your name on the mortgage or car loan.

In my friend’s case, she kept any accounts she had pre-marriage and removed herself from any accounts her ex had or they had signed up for together.

3. Check on your insurance coverage

If you’re on your spouse’s insurance plan, you may find yourself suddenly without coverage. Instead of risking it, negotiate a time with your spouse to change the insurance information, and make sure you have your own by that date. You’ll need health, auto, and homeowners (or rental) insurance. Check out our insurance page for tips on providers, coverage, and limits.

It may not seem like your biggest problem during a split, but you never know when you’ll desperately need that coverage – and the insurance company won’t care that you’re going through an emotional crisis and didn’t have time to worry about it. When my friend finally decided to call it quits, her ex moved out and canceled their renter’s policy. She figured she’d deal with it later, but then Hurricane Katrina hit – and suddenly she had a devastating amount of damage to everything she owned with no insurance to protect her. Moral of the story: Don’t go without insurance.

4. Don’t forget the taxes

The year your divorce becomes final is the year your tax status changes to single. You may have new income and deductions to deal with – like alimony.

The first year you file will be the hardest, so start working on it early. You may want to hire a tax professional to help you sort through all the changes, but read 9 Tips to Find a Tax Pro before you do.

In my friend’s case, I’ve heard her say more than a few times how hard it was to do her taxes herself that first year. If you do decide to go with a pro, watch what they do. The more you know, the better chance you’ll have of filing your taxes yourself in the future.

In theory, separating money shouldn’t be the hardest part of a divorce. In practice, everything is hard during a divorce. But you need to do it quickly to avoid bigger problems later on. After all, credit problems will follow you for at least seven years, and you don’t want to start your new life with that weighing you down.