Getting a divorce a divorce is never an easy decision and going through it not only comes with emotional side effects but also financial ones too.
This might not be the first thing to cross your mind, however, preparing to avoid the worst financial mistakes you can easily make during a divorce may save you from becoming a financial victim in the future. Here’s a list of the most common financial mistakes you can make.
[Read: Money Tips for Married Couples]
1. Lack of planning and knowledge of your household finances
First, you need to be clear about how assets need to be divided between you and your spouse. Normally, problems start to occur during negotiations, when one spouse or the other doesn’t have a clear idea of the household assets such as properties, accounts or pension plans, which often makes negotiating a difficult scenario considering that everybody wants what is best for them and if there are kids, chances are that negotiating will be even more problematic.
Therefore, to avoid making the worst financial mistakes, you must have a personal plan prior to discussing anything with your spouse with accordance to what it is that you would like from your assets and what is available to you. This allows for you to get a heads-up and prepare for anything unexpected prior to discussing anything with your spouse. Understanding the basis of assets and what each of them involves like tax entanglements or liquidity. Arguably, it’s even more important to understand the financial security that each asset will give you in the future.
Additionally, it often occurs that one spouse or the other makes a not thought out financial decision because he/she does not have a thorough involvement with their bank accounts or credit status. Truthfully, to avoid bad decisions both spouses should have a deeper insight of the family finances, which can simply be achieved by talking to your spouse to get a grasp of the financial flow in your accounts.
However, if this does can’t happen for some reason, you might find it useful to consult with a forensic accountant who is able to have a look at basically everything from tax history, individual retirement accounts and financial history of both spouses, and then make assumptions about the overall information gathered.
2. You don’t consult with a financial advisor
It’s always good to have an advisor or team of people who can objectively answer and help you with financial questions in terms of the divorce. When you have to consider your common assets, it’s a good idea to collaborate with professionals.
Financial advisers make sure that work is carried out properly by giving thorough advice on asset related information and they can consult with both spouses legally until they can come to mutual terms.
They can also create a new financial plan for both spouses and find the relevant assets according to their newly formed situation. However, the advisers don’t take place in any further processes related to the divorce.
Above all, merging with a team of people who you can trust throughout and even after the divorce is going to strongly influence the type of decision you will make regarding your financial status.
3. You neglect the divorce ordinance and agree to unwritten things
After getting a divorce, it’s common for spouses to get in clashes with each other because the unwritten promises are not kept, therefore, misunderstandings and failures to do something that was promised but never been agreed on a legal document can occur.
This often results in one person getting stuck with a stack of tasks that was agreed to be split up between one another but has never actually happened and was not put into writing. This must happen in order to avoid future conflicts and emotional arguments, which can get in the way and lead to making the worst financial mistakes later on.
As family and personal circumstances will change after the divorce ends, there is a high chance that you will not know for sure how the other person will change his/her mind about financial decisions later on, and they may not stick to the promises that the two of you verbally agreed to but did not put in written form.
That is why writing down the mutually agreed terms is a must, as you can’t expect the other person to always make rational decisions in the future. Due to the possible conflict, it is usual that people don’t put down things in writing because they want to avoid the negative side to it, however, this is what generally results in unnecessary arguments and unfair burdens shifted to one of the spouses.
Things to consider that can save you from making the wrong decisions
- Make financial plans prior to making your decisions
- Consult with a financial advisor
- Prepare and make copies of important documents
- Make sure you’re aware of your assets
- Try to come to a fair settlement with your spouse
- Have a stable financial plan for the time after the divorce has been closed
- Try to remain neutral and refrain from involving emotions when making important decisions
Whether you’re in the middle of a divorce or getting one, you will surely want to avoid making the worst financial mistakes because it may cause a disadvantaged situation in your future life. Being a more financially stable spouse than the other one can occur as factors outside the divorce may influence that, however, whilst negotiating the terms you should tidy up any emotional attachments towards each other and try to work together as a team or focus on coming to mutual terms that work best for the both of you as such decisions will make you satisfied in the future.
You don’t want to become the person who didn’t put enough time and energy into your decisions and you might regret them later, especially if you also have children to be responsible for after the divorce, not just for yourself. It is a trip that you have to take together even if you don’t want to belong to each other anymore.