These are mistakes I’ve seen through the years that can have devastating
effects on your financial well-being post-divorce. If you find yourself in
the process of divorce, grab a cup of coffee, take a seat at your desk,
and take some notes.
1. Underestimating your expenses. It is a lot harder to explain where
all that money goes than how much you make. Take some time to record all
of your expenses and develop a realistic monthly budget. Don’t forget
holiday spending, vacations, auto repair and bills that only come
quarterly or annually.
2. Holding on to the family home at all costs. Often it is ideal to be
able to keep the family home. But no matter how attached you are to your
home, it is crucial that you have a realistic understanding of whether or
not you can afford it.
3. Not taking a holistic view of your finances. If you examine each
asset or source of income separately, you lose the opportunity to
understand the interaction of taxes, capital gains, investment losses,
inflation and more. Fair settlements take into account a comprehensive
picture of all of your finances.
4. Don’t divide your assets without first creating an inventory. It’s
important to know what you have before you can divide it. Your inventory
should include details (including a description, year acquired, price paid
and current value).
5. Failing to insure spousal and child support payments. Your ability
to collect alimony and child support is only as good as your spouse’s
ability to pay. Consider life and disability insurance policies to ensure
that these payments will continue in the event of your spouse’s inability
6. Having unrealistic financial expectations. Divorce means splitting
one household into two. Stretching your income to cover two households
means that finances are going to have to tighten. Expect it and plan ahead
so you don’t find yourself in the hole financially.
7. Failing to consider your long-term financial security. If you focus
only on the immediate task of splitting assets and getting alimony and
child support, without understanding how things might look in 10 or 20
years, you’re doing yourself a great disservice.
A Certified Divorce Financial Analyst (CDFA) can review the proposed
settlement agreement (before you sign it) and discuss the long-term
financial consequences with you, to protect yourself and your family.