Avoid These Divorce Pitfalls

The outcome of your divorce can make or break you financially for the rest of your life.

No matter what else occurs, remember this. Repeat it to yourself as often as you need to. Write it on your bathroom mirror, or on a sticky note attached to your computer screen.

You’ll probably find that you need this reminder most when you’re upset, which will be often.

Every divorce is fraught with emotional pitfalls. If you’re the one who asked for divorce, you may feel guilty. If you didn’t want your marriage to end, you may feel angry. These emotions, although normal and natural, can get in the way of rational thinking, which you will need to protect your and your family’s future.

Exhausted, you may sometimes feel like surrendering, and letting your spouse have more than their share just to bring the process to an end. Don’t give in to this (very common) temptation. Repeat the mantra above, take a long walk or meditate, talk to a friend—do whatever it takes to get yourself back into self-care mode.

In the throes of divorce, people make mistakes, many of them involving money. As a Financial Planner, I’ve seen it all—often, when it’s too late to make a difference. In hopes that doesn’t happen to you or someone you care about, I’ve compiled this list of the top 10 financial mistakes during divorce:

1.     Not understanding your needs. What’s your “burn rate”—the amount you spend as compared to your spouse’s? Do you know how much you spend, and how much you need? After divorce, neither of you will have the same lifestyle as before. Knowing your income and expenditures will better help you budget for your needs, especially if children are involved.

2.     Not documenting your assets. This is one of the top mistakes women make. I advise gathering as much data about your assets as you can before filing for divorce. Run credit reports (free) on you and your spouse. Gather your tax returns and other documentation, as well. Talk to your accountant and get financial advice, if you are not good at this.

3.     Not understanding their financial documents. Get help for this, if you need it. Don’t let ignorance hurt you for the rest of your life.

4.     Not getting your assets appraised. Real estate valuation is worth the appraisal fee. What else do you have? Pension funds? A business? Cars? Jewelry? Heirlooms? Bank accounts? Make sure to include it all so, when it comes to divide the assets, you get your fair share.

5.     Relying on lawyers to evaluate the settlement. Get a second opinion, or even a third. Ask friends, loved ones, or other professionals to review the settlement your attorney has negotiated—you may be thankful for the added perspective.

6.     Not understanding the tax implications of the division of property. Many times, assets are not split 50-50. Some may be considered separate. Which assets will be regular, and which tax-deferred? The answer affects how much you keep. What is the cost basis of property and investments? Know the tax consequences of liquidating assets before you need to.

7.     Not focusing on the long term. Getting cash and assets all up front is not necessarily your best course. Give some thought to how your assets will be divided, planning for one, three, five, and 10 years in the future. Get help with these decisions, if needed.

8.     Not protecting themselves. If insurance is meant to guarantee a settlement or income stream, make sure it is properly titled. Make sure that assets are titled correctly, too, and that your beneficiaries are updated.

9.     Sacrificing their own financial well-being for children. Kids are too often used as a pawn in the divorce power play, and one spouse or the other may feel tempted to give up money in exchange for access to children post-divorce. But will this serve you, and them, best in the long run? Keep your wits about you; don’t let emotions around your children stop you from taking care of you.

10. Making decisions in the heat of the moment, or out of exhaustion. If you are upset, the best response may be silence. Give yourself time to calm down and get grounded before emailing, calling, texting, signing anything, or even speaking.

In the maelstrom of emotions that divorce can bring, you risk losing yourself. The fact is, though, that no one can take better care of you, than you. And in fact, no one else will. Looking after yourself is not selfish; it can mean that no one else will have to.

Self-care is about eating healthy foods, relieving stress, and exercising, yes. But it also involves taking care of our finances. Those of you used to having your spouse handle your assets and investments may feel wary of trying it yourself—but you needn’t fear. You are up to the task, and help is always at hand.

At Fulcrum Financial Group, we offer financial planning advice that can help you make more informed decisions for yourself, your family, and your future, even during divorce. Call today and find out how we can help you avoid the biggest divorce mistake of all: Neglecting your financial future.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.