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Managing finances during a divorce

With nearly half of all marriages ending in divorce, divorce has become a reality in many people's lives. As such, as hard as it is to even consider the possibility, having a plan once the prospect of divorce rears its hard head can help protect one's finances during such a stressful time in most people's lives.

While it is important to be optimistic and do your utmost to reconcile differences with a spouse, it is also important to protect and insulate oneself as best one can from any unforeseen financial surprises. One of the most important things that can be done to mitigate financial woes in the event of a divorce is to close all joint accounts immediately. This also includes all joint credit cards as well as any other lines of credit.

Not only does this help track individual expenses, but it also has the added bonus of making it much easier to monitor and maintain control of one's credit. Here, the help and expertise of an experienced attorney or a qualified financial adviser is strongly advised even if both spouses are on good terms. Furthermore, it is important to check one's retirement plans to ensure that the beneficiary on those accounts has been updated.

The fact that a spouse has access to personally identifying information such as birthdates and social security numbers makes it incredibly easy for them open new credit card or other financial accounts in their soon to be ex's name so monitoring one's credit score and credit history is strongly recommended.

Though there are a myriad of online websites that can track credit scores for a fee, an inexpensive way to monitor one's own credit scores is by using the free tools available on the website, which can update two of the three credit scores monthly.

If abnormal changes in these scores appear, that can be a sign of possible identity theft. In that event a free annual credit report can be requested immediately to track down the possible cause for the credit score change. Remember, an ounce of prevention is worth a pound of cure so be proactive and hope for the best but plan for and be prepared for the worst.

Source: ABC News, "How to Protect Your Finances in a Divorce," A J Smith, March 31, 2014

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