Episode 86 of the Divorce and Your Money Show is part two of a three-part series on Financial Affidavits, also called a Statement of Net Worth.
If you did not hear the first part of the series, be sure to go back and listen to it. The Income Section is the most important part of the Financial Affidavit—since both child support and spousal support are income-driven. Income is far more complicated than it may seem. Pay periods vary from 24 to 26 times per year, and bonuses, investment income, seasonal work, and overtime all affect your true income.
Expenses are the most complicated to calculate. There are thousands of types of expenses throughout the year. Categorizing them can be a nightmare, and tracking them can be even more difficult. Do you pay with cash or credit card? Do you pay your bills monthly, bimonthly, or yearly? What about one-time expenses that slip through the cracks?
Assets are anything that you own—which has value or could have value. Cars, houses, jewelry, and investments are all examples of assets. It is important to keep track of when you purchased these assets. To prevent being accused of trying to hide assets, it is important to list anything that you think may have value. That collection of Beanie Babies could come back to haunt you—if you do not disclose it.
List the liabilities and debts that you owe. Credit cards, student loan debts, and mortgages are all fairly straightforward examples.
Once you have finished filling out these four sections, you are done with the first draft. Be sure to verify that everything makes sense. Is your income lower than your expenses? Have you accidentally placed an expense in two locations? If your name is on an asset or debt, it is yours, and you must report it.
Key Learning Points
- The Income Section of the Financial Affidavit affects spousal support and child support. It is the most important part of the settlement.
- Have a full year’s worth of earnings; pay periods, bonuses, and deductions all vary in almost every job.
- Expenses are the most complicated to get right. One-time expenses, cash transactions, and categorizing expenses are difficult to organize, but you must organize them.
- Assets are anything that you own that has value or might have value. Be sure to disclose anything and everything in your assets column—as you want to make sure you will not be accused of hiding assets in the future.
- Liabilities are any debts that you owe, including mortgages, credit cards, student debt, and personal loans.
- Review the first draft you created. Look for discrepancies or anything else that does not make sense.
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