Smart financial planning when you separate

It's understandable. Spouses can be more worried about the kids, and figuring out if the marriage will be salvaged or end in divorce. Dealing with finances seems like it can wait until the final split.

But smart financial planning can smooth the separation process—whether or not a couple reconciles. And a sensible plan can be the road map for a divorce agreement, taking a lot of the sting out of a potentially nasty process.

On the other hand, if spouses separate without a clear-cut financial plan, it can make the divorce that much longer—or make it tougher to re-join finances during a reconciliation.

I recently spent some time with a financial planner, and here's her advice:

If your former partner was the one who took care of the money, you will need to find out how things were organised and decide how you want to manage your finances. Focus on setting yourself up for the future.

1. "Apart-together" could save you money.

For some couples, there's a strong financial advantage to delaying divorce, even if they're separating. For example, one spouse may want to retain coverage under the other's health insurance.

Couples may also want to simply avoid the legal fees and hassles of a divorce. Given the economy, some couples even live together after a split.

2. When it comes to debts, you're still married.

The first  thing to remember is that a separation is not legally the same as a divorce.

List all your assets, and any debts or joint debts in your name. Some spouses run regular credit checks on each other during a separation to ensure that spouses are keeping up on payments and not incurring additional debts for joint accounts.

Spouses should also establish separate credit and bank accounts to limit exposure to each other's financial behavior. If unethical behavior is discovered, spouses should take steps to contain the damage.

3. Get ready for your expenses to soar.

It can be an unwelcome surprise to learn that you're still responsible for your spouse's spending sprees. But many people aren't prepared for the bills they'll run up on their own, either.

Household overhead costs are no longer shared. Whenever a separation is involved, the combined wealth of the couple drops. It never increases.

In addition to maintaining an additional household in many cases and maybe a new car, separated couples also have to maintain two lifestyles, with substantial kid-related costs.

Your income and expenses are likely to change when a relationship ends. It's more important than ever to make sure you have a good idea of where your money comes from and where it goes. Here are two important steps to get started.

Write a new budget based on your changed income and expenses. Start by writing down all your income and expenses.

Saving a few extra dollars each week can add up to a big difference over time.

4. Put everything in writing

Many experts advise spelling out as much as you can in a separation agreement—almost as much as you would in a divorce.

They say it's best for couples to detail income, property and custody arrangements, among other issues. Coming to terms with all that can create a sense of independence, without drawing a line in the sand that prevents couples from reuniting.

A well-drafted agreement can also simplify the divorce process. Both parties have a head start at dealing with budget issues. If nothing else, it improves communication because it eliminates guesswork and takes another issue out of the mix for couples to disagree about.

For spouses who stayed at home while their partner worked, it's particularly important to reach an agreement on budgets, bills and access to credit and bank, as well as other assets. Each spouse should have a bank account, credit account, access to investments and be aware of all financial transactions.

The stay-at-home spouse needs to get very aggressive in demanding a new set of rules. If it appears that there is a lack of cooperation from the wage earner or a lack of follow-through, then you immediately need to seek advice because the stay-at-home spouse is at maximum risk. A disgruntled spouse can act pretty quickly to imperil your financial stability.

5. Take a hard look at your portfolio.

Separation can bring a lot of new financial burdens—and that may mean changing how your assets are allocated.

A major issue during separation is liquidity—having access to cash to meet the needs of setting up and running two households. So couples may need to agree on selling holdings, or changing the investment mix to boost short-term gains.

Additionally, spouses also need to think about longer-term goals. For instance, can they still afford to put away cash for the kids' college tuition while they're covering two sets of household expenses?

Separated spouses should also be aware that frequently property will be divided during a divorce the same way that it was held during a separation.

Getting on top of your finances can be daunting at any time, and even more so if you are dealing with a relationship breakup. But like a lot of things in life, just take one step at a time and your confidence will grow.