Common Financial Mistakes In A Divorce

A divorce is not something to be taken lightly. It is a life-changing experience that can be stressful and chaotic at times, but many people report that things do get better with time.

Still, ending a marriage is not easy. Going from married to single is a huge change, especially in terms of income. You won’t be able to rely on your spouse to pay the bills. Even if you receive alimony or child support, it likely won’t be enough.

Women tend to get the short end of the stick. Following a divorce, a woman can expect a 30% decline in her standard of living. Conversely, men often see an increase of 10%.

Many people make financial mistakes during their divorce. Here are some to avoid.

Making Emotional Decisions

Besides the death of a loved one, a divorce is probably the most emotional experience a person can face. Decisions made during the divorce process can have dire consequences. One common mistake that people make is to keep the family home. Many want to keep it for sentimental reasons, but maintaining a home is costly. Yes, you may have equity in your home, but depending on that money to support you in the long run is a bad idea.

Not Having Enough Access to Cash

After a divorce, you’re going to need a lot of money. Having it tied up in houses, vehicles, furniture, and retirement accounts is not ideal. You’ll want to be able to fund your divorce on your own and have enough for unexpected expenses, such as new housing, cars, and other items.

Not Adjusting Your Standard of Living

Your standard of living will likely go down after a divorce. You need to make changes, but many people fail to do so. They underestimate living expenses, leading to financial stress. To combat this, it’s important to create and stick to a budget. Your budget should include housing, utilities, insurance, childcare, and other costs.

Neglecting Retirement Accounts

Many couples overlook the division of retirement accounts or fail to use a Qualified Domestic Relations Order (QDRO). This can incur unnecessary penalties. To avoid this, ensure retirement accounts are properly divided and transferred to avoid penalties or losses.

Ignoring Tax Implications

Dividing assets and receiving alimony or child support often comes with tax implications that people don’t know about. They end up losing out on the benefits of the asset. You should work with a tax professional to understand how divorce will impact your taxes and how to structure settlements to minimize liabilities.

Seek Help for Your Divorce Case

Divorce is not for novices. If you don’t know what to expect, you need to have a legal professional on your side.

The Dade City & Zephyrhills divorce attorneys from Madonna Law Group can provide you with the help you need. Our experienced team can help you avoid making costly mistakes. Fill out the online form or call (800) 557-0411 to schedule a consultation.

Source:

northerntrust.com/united-states/institute/articles/financial-mistakes-women-make-during-the-divorce-process