How Can You Avoid Financial Mistakes in a Divorce?
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Divorce affects people on every level – mentally, physically, emotionally, and even socially.
Financially, it has the potential to be a complete disaster as it's not difficult to make mistakes.
Financial mistakes women make when going through a divorce include:
- Focusing too much on small details
- Thinking short-term
- Denying poor financial habits
- Seeking revenge
- Relying on lawyers for financial advice
- Failing to protect income from an ex-spouse
- Not following through when a divorce is final
Keep reading to learn more about why women make these financial mistakes when going through the divorce process and what they can do to shore up their finances for the future.
7 Common Financial Mistakes Women Make When Getting a Divorce
Not only is a divorce mentally and emotionally exhausting, when you’re getting a divorce you're also learning the language of family law and trying to navigate the legal system.
You’re also doing this while making some of the most important financial decisions you will make in your entire life.
It should come as no surprise that under such a large amount of stress, there are numerous financial mistakes commonly made.
Mistake #1: Getting stuck in the weeds
The details that come along with splitting your finances and your household in a divorce can be overwhelming. Many couples get caught up in small things and miss what really matters.
Try to focus on the big picture:
- How do you protect yourself financially?
- What is your end goal?
- What do you want the most out of your divorce settlement?
When couples begin arguing over every little thing, it increases the stress of the situation while also creating larger than necessary legal bills.
When you focus on the big picture, the smaller details tend to fall into place.
Mistake #2: Overlooking long-term implications of financial decisions
It’s easy to focus on the short-term and make financial decisions that make things easier for you now or in the next year.
The problem comes years in the future when you begin to see the longer-term consequences of your decisions.
Take time to consider the future:
- Where do you see yourself, your kids, your life at that point in time?
- What resources will you need?
- What won’t you need?
By doing so, you’ll position yourself for financial security for years to come.
One of the most common financial mistakes women make is keeping the house and giving up retirement assets to offset the value of the equity in the home.
While the house might come with a lot of memories, if it doesn’t set you up for long-term financial success, it isn’t the right housing choice after a divorce.
Mistake #3: Living in denial
Many people live beyond their means as a couple, which makes managing finances that much more complicated on your own.
The sooner you recognize the difference between wants and needs, the more likely you will be to succeed going forward.
Take the time to set up a budget. This will require you to be realistic about your income and expenses, but don't overcomplicate it.
Of course, you can adjust both over time, but it’s essential to know where things currently stand so you can make decisions accordingly and avoid financial mistakes.
Mistake #4: Seeking revenge
It’s easy to understand the hurt and anger that can be present during the divorce process.
However, using your settlement negotiations to seek revenge against your spouse usually means high legal fees, which can cut into whatever settlement amount you are hoping to receive.
Focus on the long-term outcomes and keep the vengeful attitudes out of the negotiations.
Mistake #5: Expecting your attorney to be a financial expert
Attorneys mean well and likely have a lot of experience with divorce proceedings and settlements. However, they are not financial professionals.
And if there’s one thing that’s apparent when looking at financial matters, it’s that everyone’s financial situation is unique.
Take the time to meet with a Certified Divorce Financial Analyst.
He or she will help you make sure you are getting the best possible settlement, by assessing the short and long-term implications of each decision. That way, you can step into your future, knowing precisely what to expect financially.
Mistake #6: Not protecting your spousal and/or child support
If you rely on the money coming from spousal and/or child support, it’s essential to protect it.
If your ex-spouse gets sick or injured and cannot work, then you may not receive support money for some time. Likewise, loss of life is not something we want to plan for, but it is something we should.
Take the time to protect your income with a life and/or disability insurance policy. It’s a small investment upfront, but it’ll be worth it if it ever becomes necessary.
Mistake #7: Not following through after the divorce is final
It’s easy to breathe a sigh of relief once the divorce is final. However, you’re not done yet.
Take the necessary steps to get those assets transferred into your name. File any QDRO’s that need to be filed, and update (or create) your estate planning documents as soon as possible.
Also, you need to be sure to inform your employer to make any necessary updates to your benefits.
It might be tempting to put these tasks off, but the sooner you complete them, the sooner you’ll be able to breathe that sigh of relief and move on to your new future.
Avoiding Financial Mistakes in a Divorce
When you walk down the aisle to marry the one you love, divorce is the furthest thing from your mind. But the reality is that 40-50% of marriages end in divorce.
You need to know how to protect yourself financially if you were to separate from your spouse.
It’s important to realize you can make severe financial mistakes during the emotionally charged time of a divorce.
Mistakes that can have a significant impact on your financial future.
If you, a loved one, or a friend are considering a divorce or currently going through a divorce, it’s crucial to look at the finances closely.
You may want to talk with a mediator, in addition to seeking legal advice from a qualified attorney. Mediation may save you considerable stress, time, and money during the divorcing process.
Article written by:
Guest contributor, Leah Hadley. Leah is an experienced mediator, Accredited Financial Counselor, Certified Divorce Financial Analyst, and a Master Analyst in Financial Forensics. After going through a divorce after ten years of marriage, her goal is to ease the stress of divorce by making the process as painless as possible for couples and individuals alike. When she’s not working, Leah loves spending time with her family, taking her kids on road trips, and volunteering with various organizations like the PTA, NAWBO and Girl Scouts.