No one gets married with the expectation of getting divorced someday. Regrettably, though, divorce rates are expected to continue climbing and it important to plan in advance if you can. Divorce affects all areas of your life, including your financial health, and can result in significant challenges.
If you’re struggling through a divorce, there are several common mistakes you should avoid to minimize the negative effects on your finances.
Avoid these mistakes to help you financially survive a divorce:
Mistake #1:
Letting the court decide how to divide your assets. A particularly difficult thing in any divorce is the decision of who gets what. You and your spouse both may have an economic and emotional investment in almost everything, from the house to the art collection you acquired together.
It is beneficial to come to an agreement on the division of assets before your case gets to court. Once the legal system is formally involved, the process is much more expensive, you are risking an outsider deciding for you who may not have the financial training your estate need, and it is very financially and emotionally draining.
Mistake #2:
Refusing to try mediation. Mediation can be a money-saving alternative to the courts. This way, you have someone to help you with the process of give and take, and their guidance as an unbiased third party. Through mediation, you can opt for methods of dividing your assets that are financially best for both of you.
For example, with investments, it’s usually a quicker process to divide them and sign them over instead of selling them and dividing the money. In addition to a longer process, selling or liquidating investments can generate considerable fees and taxes thereby reducing the original value of the asset.
Mistake #3:
Not thinking long-term. When a divorcing couple has children, or is nearing retirement age, there are long-term expenses that should be considered. A primary goal of divorcing spouses with children should be to make sure that their children receive the financial support that they will need at least until adulthood.
For couples nearing retirement, divorce causes a disruption of an existing financial structure which can have devastating results. When retirement is imminent or already in progress, the focus of a divorce property settlement should be on addressing the financial needs and requirements of the spouses going forward into the future.
What about paying for the divorce itself?
Sometimes even the expense of paying for a divorce can be stressful and uncertain. Funds are needed to hire a good attorney, perhaps a financial analyst or even a financial forensic professional to help determine an equitable split of assets. A colleague and Certified Financial Planner, Michelle Petrowski, recently wrote an article outlining nine options for financing the divorce process if your cash-on-hand is limited. It’s definitely worth a read: 9 Financing Options for a Divorce
Avoiding these common mistakes
These mistakes highlight the common pitfalls to avoid. An attorney will be valuable in many situations and will help provide the professional guidance you need to avoid losing your financial security.
We can help you through the financial challenges of divorce. Get started today with no-cost initial consultation and case evaluation. Contact McMurdie Law & Mediation at 480-777-5500.