You most often hear about the negative effect of divorce on your finances. However, it can also have a positive impact on your money, depending on the situation. The key is to make reasonable decisions and have a solid plan in place to help you through the process.
Now is a great time to start thinking about your personal finances and how to proceed. Here are a few things you can look forward to when you are proactive about financial planning during divorce.
More control over your money
While marriage means having access to two incomes, not all couples are on the same page financially. If your spouse liked to spend more than save, you may have experienced money issues on a regular basis. Once you have settled into your new life and have total control over your finances, you can make decisions as you see fit. Along with saving, you can also choose to invest your money to expand it further.
Access to retirement funds
Taking money out of a retirement account too soon can result in expensive fees and penalties. However, during divorce, you have access to financial tools that allow you to make withdrawals without incurring added costs. A qualified domestic relations order (QDRO) allows you to withdraw funds before age 59 1/2 without the 10% penalty. This is crucial when your spouse has a retirement account at the time of the divorce but has not yet turned 60.
A clean financial slate
If your finances were a mess during your marriage, a divorce allows you to start fresh. You can use the assets you received during the divorce to build a new life wherever you decide. You can also downsize your living situation to keep costs under control in the future. Keep in mind that managing a home on your own is often expensive and time-consuming. As a result, many people welcome the opportunity to start fresh.