From Megan Thomas: If I file for divorce, yet still have some joint credit accounts with my husband that I haven't yet closed, am I responsible for any debt he incurs during this time? Also, what is the smartest financial move for me: saving up some money and stashing it away, or working hard to pay down the debt we have together so I'm not burdened with it during the divorce?

Stacy Francis writes:

Don't let your ex ruin your credit and don't stick your head in the sand!

Once you've identified your debt, of course, your main goal is to keep it from getting any worse. The easy and quick way to do this is to close any joint credit card accounts prior to becoming separated or as soon as possible after separation. At the very least, you should refrain from using any joint cards once you are separated and open up your own credit card accounts.

If you and your spouse are cooperating with each other, you may be able to agree on a card or two that will remain in effect for designated purposes subject to designated limits on spending.

What happens if you keep the card open and your spouse makes a barrage of new charges? Generally, your husband will be held responsible for any debt that he incurs after the date of your separation.

Don't forget that if your husband does not make the payments on this joint card, you will be held responsible. Credit card companies want their money, and if your husband is not able to pay them, then they will certainly come knocking on your door. This could wreak havoc on your finances and your credit report.

The smartest move is to make sure that the minimum payments for any debt that you or your spouse have are being made on time throughout the divorce. You want to make sure to maintain a good credit score before, during, and after divorce.

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Volumes have been written on how to handle your finances. We are going to try and cover it all, so fasten your seatbelts.

Set priorities

Sit down with a cup of tea and think about what it is that you want in life. Do you want to send your children to Harvard? Retire at 45? Travel the world? Open your own business? Write down all of the ideas that pop into your mind. Once you have these ideas down, prioritize them from the most important to the least important.

Track your spending

At the end of the month, do you find yourself wondering where all your money went? For a month, track every penny you spend (even the $1.00 you spend getting a drink from the soda machine) in a spending diary. At the end of the month, sort what you spent into topics like dining out, groceries, clothing, grooming, etc.

Create a budget

Review your spending diary and the amount of money you have coming in each month. Does your spending align with your priorities and values? Create a workable monthly budget that reflects your priorities and values. Your expenses should be less than your income.

Get out of debt

Many people find themselves surrounded by debt, whether it is school loans, credit cards, or home mortgages. Being debt-free is a liberating feeling. To get out of debt, start paying off your highest interest loans first.

Retirement

The best rule of thumb in preparing for retirement is to save 10-20% of your income. Start saving early so that your money can accumulate and grow for many, many years. There is a lot of flexibility in saving for retirement, including many different types of tax advantaged accounts.

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Divorces are very complicated and can take a huge emotional toll on you. The last thing you need is for your divorce to be a financial disaster as well. One of the biggest questions on everyone's mind during a divorce is "How are we going to split our assets?" Unfortunately this is a complex question because it varies from case to case due to state laws, judges, and each individual situation.

State Laws

Most states use equitable distribution to divide marital property. This method looks at the financial situation of each individual, so although it is more flexible, it is extremely difficult to guess what the outcome will be.

There are nine community property states that consider all property acquired during the marriage to be equally owned by each spouse and is split 50/50 in a divorce.

Know What You Are Worth

To calculate your and your husband's net worth, add up all of your assets, then subtract all of your liabilities. Make sure you know the current value of your home; have your home appraised since the value could have gone up significantly since you purchased it. It is best to consult with a financial expert to help you assess the value of your investment accounts--both their current and their future value. Be sure to have any businesses or collections such as fine art appraised as well.

Splitting Investments

Divvying up your stocks, bonds, 401Ks, IRAs, pensions and other investment accounts can be a daunting task. The bottom line is the share of marital assets you get after the tax man gets his. Say your spouse handles all the investments and offers to split them 50/50. Sound fair? Maybe and maybe not. Be sure to look at the value of your assets relative to your spouse on an after-tax basis. Then decide if you like the deal.
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