Managing your Finances after Divorce

Managing your Finances after Divorce

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A guide to protecting your financial health during and after your divorce.

Divorce affects the finances of both parties as they split. Sometimes one partner faces a much lower standard of living -- and dramatic lifestyle changes because of that. With the housing market down, interest rates falling and the costs for goods and services is increasing, there's an even bigger effect on couples.  Here are a few tips in order to ensure your finances stay in order during this challenging time.

The task of dividing your assets is a crucial one.  Typically, everything you and your spouse acquired from the day you were married is subject to division. The exceptions are individual inheritances, gifts to an individual spouse, and assets acquired before marriage. When assets are divided, the court considers each spouse's earning ability, the length of the marriage, and how much each spouse contributed to building household assets.

The exception to this are the nine "community property" states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Under the laws of these states, almost all assets will automatically be divided equally.

Notify others of your new name.  If the divorce decree provided for a name change, get a new Social Security card, driver’s license, passport and credit cards. Notify your bank, investment account manager, all credit accounts, personal lawyer and accountant of the change. To change your name with the Social Security Administration (SSA), file Form SS-5 at a local SSA office. It usually takes two weeks to have the change verified. The form is available on the agency’s Web site, by calling toll free 1-800-772-1213 and at local offices (you can find these addresses at the SSA Web site). 

Be sure to review and update your retirement plans.  f there was a division of a pension, 401(k) or IRA, confirm that a Qualified Domestic Relations Order has been submitted to the fund administrator and implemented correctly. Also make sure that, as recipient of the distributions, you have established an account for the funds to be transferred to. If you were married for at least 10 years, you are entitled to make a claim against your former spouse’s Social Security when you are eligible for the benefit. And ex-spouse can receive either 100 percent of his or her Social Security payment, or 50 percent of the former spouse's entitlement. Check with the Social Security Administration for details. 

Be sure to review your will or, if you don't have one, draw one up. You should consult an attorney familiar with your state's estate laws to ensure that your assets are properly distributed. Do not wait until the divorce is final. You should review and amend your estate plan at the same time you decide to commence a divorce proceeding. Also make sure to review beneficiary designations for pensions, 401(k)s, and life insurance policies. Federal law requires a spouse to be the sole beneficiary of pension or 401(k) benefits unless that right is waived in writing by the spouse.

If you find yourself faced with divorce, it is essential to protect your financial future. Enlisting the help of an attorney and carefully monitoring the process can ensure that your interests are considered and that you won't need to revisit the proceeding later on.

State Tax Receipts Are Down--Are Your Savings Next?

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State tax receipts are plummeting--what does this mean for you?

To say that state tax receipts are down is hardly news.  Between unemployment driving down state income tax receipts, a laggard consumer market cutting sales tax, reduced driving pulling down gas taxes and businesses shutting their doors or moving elsewhere to drive down corporate tax receipts, the tax picture has never looked worse for the states.  But what does that mean to you?  The biggest thing is that states will either need to cut budgets or raise dollars, and often both. 

There are three things that jump out at me that this means--here's how to protect yourself.

State debt may offer better rates.  Cash-strapped states may look to borrow, and thus offer better bond rates for those interested in investing in a state government.  Though there is a chance of default on this debt in the future, it is somewhat abrogated by the fact that states take in money every year thanks to taxes on whatever's left.

State taxes may go up.  Thus, if you have the choice to take income in 2010 or 2011, you may want to stick to the devil you know rather than the devil you don't.  Any state tax hike is likely to take effect not this year (being as this year's already a third over with, almost) but rather next year.  Also consider where you may be able to take more deductions if you have a small business or itemize your annual tax returns.  The more deductions, the less paid out.

City taxes, where applicable, may also go up.  Counties and cities that depend on revenue sharing with the state will get a smaller chunk of the pie since the overall pie is smaller.  So in places where there are city or county taxes, you may want to consider moving before the city or county in question gets the idea to jack up taxes.  Even if you have to commute a little longer to get to your job, chances are the extra gas money won't be as high as jacked-up city taxes, county taxes, or even property taxes.

It's all about adding to your savings out here at Best Cash Cow, and when you can protect your current savings, that's just as good.

SmartyPig Getting Ready to Buck Trend and Raise Savings Rate to 2.15% APY

Rate information contained on this page may have changed. Please find latest savings rates.

SmartyPig is getting ready to buck the trend of declining savings rates by announcing that it is raising its rate to 2.15% from 2.01% APY. As part of that increase though, it's creating a tiered rate system. Only the first $50,000 will receive the higher rate.

SmartyPig is getting ready to buck the trend of declining savings rates by announcing that it is raising its rate to 2.15% from 2.01% APY. As part of that increase though, it's creating a tiered rate system. Only the first $50,000 will receive the higher rate. The tiered system works like this:

*Effective May 19, 2010:

  • Interest rate earned on balances $1 - $50,000 will earn 2.133% (2.15% APY)
  • Interest rate earned on balances above $50,000 will earn 0.499% (0.50% APY)

So, if you plan on investing more than $50,000 SmartyPig is not the place. The 2.15% APY though is one of the top savings and money market rates according to the BestCashCow rate tables.

Here's what SmartyPig's CEO had to say in the press release announcing the rate increase:

"With credit card issuers expected to raise interest rates to 16 or 17 percent by the fall(3), we believe it is important now, more than ever, that consumers adopt responsible financial habits," said Bob Weinschenk, chief executive officer, SmartyPig. "Which is why we firmly believe in rewarding customers who want to save and spend smartly, and give them the opportunity to get ahead again and stay there."

Several Things to Know About SmartyPig

SmartyPig is not a typical savings account. The site works by creating goals that you can save for: a vacaction, college tution, a new television, etc. Then, when you are ready to withdraw the money, you can do so in one of three ways:

  • You may put all of your savings plus interest on the flexible SmartyPig MasterCard® debit card
  • Have it sent back to your bank
  • Receive up to a 12% cash boost on your savings by placing it on a retail card like, Best Buy, Travelocity or Macy’s

So, if you're saving for a television or cloths at Macy's, the savings get an extra boost. If you just want to use it like a regular savings account, you can have the money sent back to your main bank when you are ready to widthdraw funds.

The second thing to know is that SmartyPig does not actually keep your money. They are not a bank. Instead, your funds are held by West Bank, an FDIC insured bank. There has been some debate on various sites about whether those individual accounts are FDIC insured. In the past I have spoken with West Bank about this issue and they assured me that each individual account was insured up to the maximum allowed by the FDIC.