Financial Abuse in Relationships: 5 Steps to Establish a Solid Financial Foundation

First, if you are considering leaving an abusive relationship and are in an unsafe situation, I encourage you to contact The National Domestic Violence Hotline for assistance.

If you are experiencing financial abuse in your relationship, it's important to take action to protect yourself. Financial abuse is a form of domestic violence that can take many forms, including limiting access to funds, forbidding employment or education opportunities, restricting spending, and forcing someone to accumulate debt. It is often used as a means of control by abusers to maintain power over their victims. It is very common for financial abuse to be present if there are other types of abuse in a relationship.

Signs of financial abuse include being unable to access bank accounts or other financial resources, having your spending monitored or controlled by your partner, and being forced to give up control of your finances. If you are experiencing any of these signs, it's important to seek help and create a safety plan.

First and foremost, reach out to trusted friends or family members for support. Having a strong support system is crucial in leaving an abusive relationship. They can provide emotional support, help you find resources, and even offer temporary shelter if needed.

This post outlines five steps to help you establish a solid financial foundation and regain your financial independence after leaving an abusive relationship. From organizing your financial documents to creating a spending plan, these steps can help you take control of your finances and build a brighter future.

Financial Abuse in Relationships: 5 Steps to Establish a Solid Financial Foundation

Step 1: Get your financial documents organized

When leaving a financially abusive relationship, it's important to get organized. I recognize that you may not have access to all of your financial documents, but for those that you can access, find a safe place where you are going to store them. If you are concerned about raising any red flags, you may want to store them with a family member or friend instead of in your home. You can get a small file box. If necessary, consider using a safety deposit box at a bank. Here is a list of items you may want to store there (some may not be relevant for your situation):

• Birth certificates for you and your children
• Social security cards
• Passport(s)
• Marriage certificate
• Tax returns
• Will
• Insurance policies
• Mortgage and/or other loan documents
• Rental agreement
• Bank account statements
• Credit card statements
• Retirement account statements
• Credit report
• Car title
• School records
• Medical records

If you need to request any of these documents and do not want them mailed to your home, set up a post office box.

Step 2: Take a financial inventory

Some individuals might refer to it as a statement of net worth or perhaps call it your personal balance sheet. No matter the terminology used, I'm talking about a crucial document that compiles all of your assets and liabilities into a comprehensive overview.

When we review assets, we're looking at a wide array, including your bank accounts, retirement savings, real estate investments, business interests, and even valuable personal items like jewelry or art. On the other side of the equation, liabilities encompass loans, credit card balances, mortgages, and any other debts you might have accrued.

While it's possible you might not have immediate access to all this information, it's vital to gather as much as you can. Additionally, it's beneficial to note the existence of accounts whose current value might be unknown to you at the moment. For example, if you know your spouse has a checking account and you know what bank it's at but you don't know how much is in it, document the bank and the account and write TBD for the account balance.

Moreover, conducting a thorough inventory of your insurance coverage is equally important. Insurance serves as a critical safeguard, protecting you against substantial financial losses that can arise from unforeseen circumstances. Take the time to detail the types of insurance policies you hold, whether they are for health, life, property, or other forms of coverage. Include information about the insurance carrier, the policy owner, specific benefits covered under each policy, and who the beneficiaries are. This step is not just about knowing what you have but understanding how it protects you and your loved ones in various scenarios. 

By taking these comprehensive steps to document your financial and insurance statuses, you're not just preparing for the present. You're also laying a solid foundation for future financial planning and security.

Step 3: Establish your own financial identity

For many in a long-term relationship, it is common to have all of the finances combined. However, if you are planning to be on your own, it's essential to establish your own financial identity. This can feel like an overwhelming step for some, but it can also be incredibly empowering. For starters, you'll want to get a bank account in your name. When opening an account in your name, be cautious regarding any mail that will be generated from opening the account. Again, you don't want to draw any attention to your preparations. Banks do, however, require a physical address when opening an account, so while you can provide them with a post office box for mailing, you will need to provide a physical address in order to open the account.

Also, if you do not have a credit card that is in your name, be sure to open one. This is different from being an authorized user on someone else's account. When you are an authorized user on someone else's account, they can remove you from that account at any time. Also, you are not establishing your own credit history. If you are married, you will be able to use your household income to open a credit card even if you do not have your own income. Make small purchases with the credit card and pay the balance off in full each month in order to develop a solid history of making consistent payments. Good credit history is necessary for things like getting an apartment and/or a loan down the road.

Related post: How to Prepare for Divorce for Stay-at-Home Moms

Step 4: Create a spending plan

Yes, a spending plan may also be known as a budget, but let's face it, many of us simply do not want to talk about budgeting.

Start with your income. Include your employment income as well as any other sources of income. If you are not currently working, do some research on jobs that you would be eligible for to determine your earnings potential. If you are using your home computer to do research, use a private browsing window or incognito tab on your browser, so the next person who uses your computer does not see what you have been researching.

In addition to your income, you'll need to get a sense of your expenses. If you are leaving your relationship, your expenses will likely change substantially. Here are some categories to consider when thinking about your expenses:

• Rent/mortgage
• Utilities (gas, electric, water, etc.)
• Phone
• Groceries
• Childcare
• Insurance
• Medical/dental/prescription
• Pets
• Taxes
• Charitable contributions
• Gifts
• Entertainment
• Other

We've previously written about why it's critical not to underestimate your expenses when negotiating spousal and child support. 

Step 5: Compare your income and expenses

Here's the tough part that requires your immediate attention: analyzing how your income stacks up against your expenses. If you find yourself in a fortunate position where your income substantially exceeds your expenses, congratulations! That's an ideal scenario. Unfortunately, for many, this balance tilts the other way. The transition from maintaining one household to managing two can lead to a significant uptick in expenses, pushing your financial planning to its limits. This change necessitates a careful evaluation of your budget to identify effective strategies to bridge any financial gaps.

In certain situations, you might discover that public assistance programs are available to offer some relief and help narrow the financial divide. However, not everyone will qualify for such support, which means you may need to consider alternative solutions to stabilize your financial health. This could involve increasing the number of hours you work at your current job, or even taking on a second job to supplement your income. Admittedly, these steps can be challenging, but they are often necessary to ensure you meet your financial obligations and maintain stability.

Understanding your financial baseline is critical. By knowing precisely where you stand in terms of income and expenses, you can develop a more informed, strategic approach to managing your finances. This initial assessment acts as a springboard, helping you to determine the most viable path forward. Whether through accessing public assistance, adjusting your work hours, or exploring new job opportunities, the goal remains the same: to find a sustainable way to balance your finances and move forward with confidence.

Related blog posts:

Financial Abuse: Understanding It & How to Protect Yourself 

How to Protect Yourself Financially When Divorcing a Narcissist

 Leaving a relationship where there has been financial abuse can feel overwhelming  and intimidating. Not only are you dealing with the emotional aftermath of leaving, but also the financial implications of separating from someone who may have controlled or manipulated your money.

If you've experienced financial abuse in your relationship, it's important to know that there is help available.

Next steps

If you have taken these steps to create a solid financial foundation for yourself, congratulations! I recognize that leaving an abusive relationship is extremely difficult, both emotionally and practically. However, you are well on your way to being financially empowered. The next steps are a little different for everyone, depending on the specifics of your particular situation.

If you are contemplating divorce, I strongly encourage you to meet with a Certified Divorce Financial Analyst (CDFA) who can guide you through the financial aspects of the divorce process and help you to avoid costly mistakes.