For most people, going through a divorce is a mentally exhausting process. Not to mention emotionally and physically draining. And though you might be dealing with emotional and mental trauma, you still need to carefully review your finances to make sure your divorce settlement agreement is fair and equitable. With divorce brain, that’s easier said than done!
Even if you don’t feel overwhelmed with everything going on, here are the most common divorce money mistakes to be on the lookout for:
Underestimating Expenses After Your Divorce
During the divorce process, you will complete a financial affidavit that reflects your expenses AFTER the divorce. It is critical that you are realistic and not leave anything out. In certain states, this information may determine spousal support. So, include everything from insurance deductibles to anticipated household expenses for the following year. If you underestimate your costs, you could be in real trouble and have to find money elsewhere. In the case of the primary breadwinner, you could end up agreeing to pay an amount that you can’t afford. A Certified Divorce Financial Analyst™ can review your affidavit for errors and ensure you don’t omit anything.
Allowing Your Emotions to Drive Decisions
The divorce process is draining in many ways, and it’s perfectly natural just to want to “get it over with.” But throwing up your hands and agreeing to a settlement to get things over isn’t the answer either. This line of thinking often leads to bankruptcy down the road. There is a vast difference between equal and equitable. A straight 50/50 split of assets seldom results in a genuinely equitable settlement. Although challenging, you must put your emotions aside and talk to your spouse. When working through your divorce, take your time. Don’t be afraid to look to outside sources to help you get off the emotions rollercoaster. Make sure you have thought about what your future will look like after your divorce.
Believing Attorneys are Financial Experts
While your attorney may be an expert in the law, they’re probably not a finance expert. Would you ask your mechanic for advice about that rash on your arm? No, why expect your attorney to be an expert in finances? Most attorneys will ask you to fill out your financial affidavit and take you at your word that it’s good. A good attorney may look over the paperwork for errors, but don’t expect too much else.
One of the most common missed valued assets is a pension, which becomes a more significant issue if the pension is a larger piece of the marital property. Many attorneys simply accept a statement with the present value as the correct value. It’s not. Not by a long shot. A CDFA® can help you value your assets properly and help you consider all the tax ramifications.
Letting Your Attorney Do the Talking for You
Directly communicating with your spouse can save you both time and money. I know for some couples, just being in the same room with each other is too much, but there is a cost to this kind of relationship—literally. The more you have to relay information to your attorney, the more you ultimately pay. And some attorneys may charge up to $600 per hour to talk on your behalf. The more you can look past your personal feelings and talk to each other, the better off you will be.
Divorce by itself is exhausting enough. Don’t further complicate your life by making these common divorce money mistakes. Make sure you hire the right experts that can help you make these important financial decisions. Put yourself in the best possible to succeed in your next stage of life.