Quick Tips: Alimony & Child Support
Divorce can be financially devastating to either or both spouses if you do not plan for alimony and child support correctly. However, it’s possible to get through divorce without emptying your pockets. Taking the necessary precautions and educating yourself on fiscal policy can reduce the burden for all parties.
(If you need help with organizing your financial documents, you can get a copy of our FREE Divorce Financial Documents Checklist.)
Child support payments are calculated by the state the divorce is granted in. Most state guidelines account for the number of children, each parent’s income and the custody agreement reached. Child support can be reviewed and adjusted periodically, but be aware of how these payments fit into your monthly budget.
If you will receive alimony or child support, these payments may only cover daily living expenses. However, if you’re able to pay your bills with your current income, alimony or child support may be considered “extra”. If this is the case, you must decide how to best allocate that money.
A safe way to use alimony payments is to set up emergency savings. Or you could put child support towards a 529 college savings account for your children. Keep in mind that child support doesn’t get reported as income on your taxes, but alimony does. It’s always better to safeguard your money in uncertain times. Planning for the future will be a big relief after the divorce settles down.
As a reminder, when your divorce is finalized and your assets are legally divided, you will want to change names on stocks and bonds, car titles and house deeds. Look at the beneficiaries on your retirement plans, life insurance policies, investments and savings accounts to see if they need updating.
Child support and alimony play a huge roll in the years following a divorce. Make sure to adjust your finances and expenses to reflect the upcoming changes.
For help with budgeting and figuring out expenses during your divorce, check out our article How To Handle The Bills and Banking During A Divorce.