Finances are one of the main reasons people get divorced, and it tends to be one of the areas where the most mistakes can be made during the divorce. They say money is the root of all evil, and while that may not be entirely true, money can cause some problems. This is especially true during a divorce settlement. The potential for making some major mishaps is high, so you want to be as careful as possible when you trying to get your divorce handled. Let’s look at some of the most common types of financial mistakes to avoid when getting a divorced, so you don’t get stuck in a precarious situation.
Mistake #1: Knowing Nothing About Your Finances
Unfortunately, many people are in the dark when it comes to their finances. This is often because one spouse tends to handle most of the financial issues in a marriage. This means that the spouse who took care of the finances knows more about them than you do. If you don’t have any information about things like assets, income, retirement accounts, investments, etc., you will be at a severe disadvantage when you are trying to settle your financial issues.
If you are not careful, there is a chance you could end up becoming a victim. When your spouse has all of the knowledge, it becomes easier for them to hide important information they may not want you to have. You mustn’t let this happen. You need to start taking a stronger interest in your finances as soon as you can.
Mistake #2: Not Knowing What Your Spouse Is Doing with Assets
When either you or your spouse files for divorce, neither of you is allowed to sell any assets or retitle marital assets without permission from the other spouse. However, this doesn’t stop some spouses from trying to do this, especially if they feel their husband or wife doesn’t know much about the finances. They may try to sell off certain assets and then hide the money, so it doesn’t have to be split.
You need to be aware that this is a possibility and if you believe that your spouse has done this, let your attorney and the court know. In some cases, you might need to hire a forensics accounting expert to help find assets that may have been hidden.
Mistake #3: Not Trying Mediation and Negotiation
You don’t have to go through litigation in your divorce case. There is no requirement that you and your spouse have to fight it out in court. If you can agree on some or all of the aspects of your divorce and settle, you can avoid a host of problems.
You might be able to work with your spouse to agree on things regarding parenting time and division of property, for example. When you work together, even if you aren’t able to settle on all areas of the divorce, it will make the process easier. Making the process easier tends to mean saving money in legal fees.
Mediation also offers more flexibility, and it allows you and your ex to make your own decisions. If you end up going to court, the decisions will end up being out of your hands. The judge is the final arbiter of what happens.
Of course, mediation may not be possible for all couples. Sometimes, people can’t get along or one spouse is actively trying to cause problems. If that’s the case with your divorce, don’t worry. You can still come out ahead in your divorce when you understand the biggest mistakes to avoid and work with the right specialists.
Mistake # 4: Not Thinking About Taxes and How They Can Affect the Divorce Settlement
You need to understand how your divorce will affect your taxes. Are you going to be taxed on anything you received through the settlement? When getting divorced, in addition to working with a divorce attorney, you should contact a tax professional. Talk with them about how the divorce and division of property and assets could affect your taxes.
Mistake #5: Signing a Settlement Too Soon
No one likes all of the hassles that come with a divorce. However, just because you want it to be over as soon as possible doesn’t mean that you should just sign off on the first potential settlement. You have to think about how the things you are agreeing to will affect you and your finances now and in the future.
You have a lot of things to consider including child support, taxes, investments, health costs, assets, living expenses, etc. You want to make sure you aren’t going to come out behind in your divorce. Work with an attorney or a financial planner and make sure you properly evaluate all of the settlement proposals.
Mistake #6: Not Thinking About Your New Budget
Another issue that affects a lot of people who are getting divorced is the “shock” of their new budget. When they were married, they were accustomed to having more disposable money in many cases. This was because there were likely two incomes. However, when you are divorced, you are going to be living on less money than you had before, and this is hard for many.
You have to take the time to think about your new budget. What does this mean for where you live? A lot of times, it means you will have to downsize and go into an apartment rather than a house. It may also mean that you will be eating out and going out less. Maybe you have to start buying less. Maybe you have to give up the car with the high payment and costly insurance. Think about your new budget and stick to it, so you don’t start floundering financially.
These are some of the biggest financial mistakes that people tend to make when they are getting a divorce. By understanding these issues, it can help keep you from making them yourself.