Avoiding key financial mistakes is paramount, as these errors can have far-reaching consequences.
According to the Institute of Divorce Financial Analysts (IDFA), 22% of divorces result from money issues. Indebted partners, rash financial decisions, and unfulfilled expectations are common ways finances can lead to divorce. After separating from your partner, how you handle your divorce significantly determines your financial security.
Some financial mistakes during the divorce could jeopardize the process and negatively impact your finances. To help you avoid this, here are the top financial mistakes to avoid during a divorce.
Having Little Knowledge About Your Finances
Spouses who let their partners handle their finances have little to no knowledge about their financial situation. This occurs when all financial decisions are so intricately tied to your partner that your financial independence is almost non-existent. This could work to your detriment.
- Be sure to have the following financial documents to be safe after the divorce:
- Bank statements
- Loans and credit reports
- Credit card information
- Retirement accounts statements
- Investment account statements
These documents can help you define your financial situation and give you firm ground to get your fair share after the divorce. It enables you to separate your personal and marital assets.
Emotional Attachment to Unnecessary Expensive Things
Sentimental attachment to unnecessary, expensive things could cloud your judgment, and you could fight for items that aren’t worth it. Your primary focus after the divorce should be rebuilding your life, and holding on to unnecessary, expensive things may not be worth it.
While you’ll want to maintain your high living standards, enjoying a peaceful and comfortable life with a few sacrifices is much better than straining your budget for the finer things in life. Try downsizing and starting over small, then build from there.
Ignoring Hidden Assets
Divorce is sometimes a contentious situation, and your spouse may resort to unscrupulous tactics like hiding assets, so you get the short end of the stick. If you suspect your spouse is hiding assets, you’ll want help from a reputable divorce attorney. The attorney will help you sniff out these hidden assets to get your fair share to start your new life.
Forgetting Tax Implications
Uncle Sam is the last person that comes to mind during a divorce. However, the 2018 tax plan may affect your divorce finances. For instance, did you know that spouses no longer get a tax alimony when paying alimony? Also, hefty tax penalties await should you choose to liquidate IRAs, 401ks, and other investments. Not considering taxes could leave you with less than you anticipated after the divorce.
Let Us Handle Your Divorce
The emotional stress of divorce often leaves little room for organizing finances and making prudent money decisions. Having a reputable divorce attorney to handle your divorce legalities could free your mind so you can crunch the numbers and ensure a financial safety net after your divorce.
Speak With an Experienced Attorney
Our firm uses experience, good communication, and availability to help families get through life changing events.