During the course of your divorce, you will need to make a number of decisions that will have a long-term impact on your financial picture. Because most people have never been through a divorce before, it can be all too easy to make choices that could negatively affect you now and in the future.
The following are a few of the most common financial mistakes people make as they work through the divorce process:
- Not completely understanding expenses: Most people know exactly how much money they earn every month, but it can be easy to underestimate your expenses as you go through the divorce process. It’s important to create a full monthly budget before your divorce is finalized so that you have a realistic picture of what your financial responsibilities will look like.
- Not thinking through what to do with your home: Many parents believe the person with more custodial time with the kids should keep the family home. This is not necessarily the best financial decision. First, you should determine whether either party can actually afford to keep it. You should not have to feel as though you need to give everything up just to keep the home.
- Not understanding debt liability: If you have debts incurred during marriage, you and your former spouse share responsibility for them moving forward. This includes unsecured debt, such as credit cards. But even if your settlement says only one of you is responsible for a certain debt, creditors will still come after you both. It’s best to pay off these types of debts before the divorce is finalized to avoid these headaches, if possible.
- Not creating a long-term financial plan: You need to plan for your long-term financial security in addition to your short-term budget. You might choose to work with a financial planner, who can help you set yourself up for success. This is especially important if you have children.
- Assuming fair is the same as equal in property division: The asset division process does not work by taking everything you own and splitting it down the middle. There are a number of factors that go into a court’s decision, and you need to prepare for the possibility that you might not get as much as your former spouse.