Divorce has a significant impact on your entire life. You are not alone if the financial implications of divorce have become one of your biggest worries. Poor decision making and planning during divorce can cause financial troubles, including long-term issues like not being able to achieve your retirement goals.
What can you do to prevent financial mistakes during your divorce? The most important step to take is to hire a divorce attorney you trust. Your attorney will help you evaluate your financial situation and develop a plan to help you get the most out of your divorce agreement.
Common financial mistakes
In addition to consulting closely with your lawyer, avoid making some of the most common financial mistakes during divorce. These include:
- Cashing in your retirement accounts: Avoid cashing in your 401(k) and other investment accounts to pay for bills or increase your savings. Your financial goals will likely change after your divorce so do not make any decisions before your divorce is finalized.
- Failing to understand spousal support: The tax implications of paying spousal support have changed for 2019 so be aware of how this will impact you, whether you plan to pay or receive spousal support.
- Unnecessary purchases during your divorce: Do not go shopping to make yourself feel better or to take your mind off your divorce. Instead, try to create a budget you think you can stick to and test it during your divorce. You can make adjustments as needed and it will help you better understand your purchasing habits and where you can save money in the future.
- Fighting over the house: It is best to keep an open mind when it comes to your family home. Consider if it is worth keeping the house or would you benefit more from selling the home and sharing the profits? While the home holds many memories, it is best to think logically instead of emotionally when it comes to what happens to the house during your divorce.
- Forgetting to make a financial plan: Do not forget to have a plan in place before you start divorce negotiations. The more you understand your financial situation and how different arrangements will impact your finances, the better you can plan for the future. Your lawyer will be able to help you review your finances and create a plan that will protect your interests.
It is hard to deal with the emotional challenges of divorce. However, understanding the common financial mistakes couples make during divorce can help you better plan for the future.