Unmerging Shared Finances Following a Breakup

Have the Hard Conversations

The first and most crucial step in separating your previously joint finances is having direct and honest conversations with your former partner, no matter how difficult. Even though tensions might be high in the wake of a breakup, it’s crucial to discuss money calmly and rationally to ensure a stable transition from joint to individual financial management.

Setting clear expectations upfront ensures mutual understanding and helps avoid conflict in the future. Consider involving a neutral third party, like a financial advisor or mediator, to assist you through these conversations if necessary.

Discuss Debts & Review Assets

Dividing assets is one of the most fundamental steps in unmerging your finances. If you’re going through a formal divorce, many of these steps will be handled by court order. However, if you’re ending a long-term relationship outside of marriage, it’s important to take this step seriously to avoid future conflict.

Start by making a comprehensive list of everything you have between the two of you, including all debts, assets, and other accounts & possessions. Make sure you include:

• Debts: Credit cards, student loans, medical bills, mortgages, car loans, etc.

• Assets: Anything you own, including vehicles, homes, and properties, as well as accounts, including checking, savings, investments, and retirement accounts.

• Possessions: Valuables like jewelry, art, and collectibles, as well as furniture and household items.

Once you’ve added everything to the list, it’s time to decide who handles and gets what. Document all agreements in writing so you can avoid any potential disputes down the line.

Typically, whoever owns something or whoever’s name is on the loan or account will retain ownership, but there are exceptions in certain instances and rules that vary by state. For shared assets, you’ll need to determine how those will be split.

For debts, decide how those will be handled moving forward. Will one of you be assuming payments, or will you both continue payments until the debt is fully paid off? Outline a clear plan for payments or refinances and who is responsible for which portion of the debt. Consider closing joint credit accounts to prevent future financial entanglement.

Build Your Own Budget

Now that you both have a clear understanding of your new financial situation, it’s time to create a budget that reflects your now separate finances. This new budget should be based on your individual income, any debts or payments you are assuming, your monthly living expenses, and your unique savings goals. Having a budget all your own allows you to adjust to life on a single income and take the reins on your finances.

Check Your Credit

Splitting finances can significantly impact credit, especially if one partner has a better history. If your partner has the better credit score between you two, work to get yours in optimal shape. Improving your credit will help you qualify for loans with better terms and interest rates when you’re on your own.

If you need some help getting your credit in better shape, follow these tips:

• Pay your bills on time, every time.

• Reduce your debt-to-income ratio by paying down outstanding balances.

• Keep credit card balances low.

• Avoid opening multiple new credit accounts at once.

TIP: Adjusting to a new, single income can be challenging. If you believe you will not be able to make a loan payment or bill on time, do not skip the payment. Instead, contact your financial institution or vendor before the payment is due. They can often help work out a payment plan that will not impact your credit score.

Evaluate Your Insurance

Don’t forget to review and update your various insurance policies in the wake of your breakup. Make sure you look at:

• Home & Auto Insurance: Decide who will maintain which policies and who will take over payments. Update your coverage to reflect your new living arrangements if you are relocating.

• Life Insurance: Determine if you need to transfer any existing policies or update beneficiaries. Ensure all policies align with your new financial situation and future needs. 

Tackle the Taxes

Divorce can bring significant changes to your taxes. You may need to change your filing status, adjust withholdings on your paycheck, or adjust your payments. The division of assets and any potential alimony or child support payments will also affect your taxes. Consider working with a tax professional, especially in your first year of single life, to help you understand the tax implications of these major life changes and guide you to avoid any issues or surprises.

Arrange Alimony & Child Support Payments

If you and your ex-partner have children in the picture, you may need to arrange child support. Depending on the terms of your divorce agreement, alimony payments may also come into play. Both payments can substantially affect your finances, adding additional expenses to your budget. Make sure you understand the legal requirements for each payment.

Keep Consistent Records

Managing your finances solo can be difficult. You’re going through multiple changes at once and taking on new aspects of your finances, some of which you may not have managed before. Maintaining detailed records of all agreements, documents, and changes to your financial accounts is crucial. This step will help you stay organized and remain on top of all your financial obligations.

Any agreements with your ex-partner should be made in writing and stored in a safe location. You should also keep detailed records of any payments on shared assets or for child support and alimony.

Open Your Own Accounts

One of the final steps of unmerging your finances is opening your individual accounts. If you have joint accounts with your ex-partner, it’s time to close them. Make sure to stop any automatic payments being drawn from your old joint accounts.

Then, open separate checking and savings accounts to manage your money on your own. Your new individual accounts will allow you to establish economic independence and make managing your money much easier.

We’re Here to Help!

Unmerging finances after a divorce or breakup can be a complex process. Fortunately, with careful planning and clear communication, it is possible to navigate this transition smoothly. By taking control of your financial future, you can set yourself up for success in this new chapter of your life.

We are here to support you with the financial tools and resources you need to succeed. If you want to open new accounts or learn more about our financial planning services, we’re happy to assist you. Please stop by any of our convenient branch locations or give us a call at 888-777-9982.