The most challenging aspect of divorce is child-related issues. After that, it is finances. How your property and accounts will be split and how it will affect your future can be highly stressful and complicated. Fortunately, there are common mistakes that are easy to avoid. Understanding the basics of what divorce will do to your finances is the first step towards avoiding the pitfalls that lay ahead. In this article, we’ll discuss what these common mistakes are and how to avoid them when it comes to your own divorce.
Don’t Underestimate Your Expenses
Divorce is a time of accounting for your income and expenses. The inevitable first step in dividing your finances is to account for them. Therefore, you need to be acutely aware of how much money you bring in every month and exactly where it goes. Underestimating your expenses, particularly your future expenses, is a common mistake many people make. If you ignore inflation, for instance, you may find it difficult to maintain your quality of life.
It’s Not Always Best To Keep the House
Emotions run high during a divorce. Your lifestyle changes rapidly, and it’s common to want to hold on to some sense of normalcy. A common mistake people make during divorce is fighting too hard to keep the family home. When young children are involved, you may think it’s best for their well-being to avoid moving to a new home or community. It is probably not in your or the children’s best interest, however, to continue to live in a property you can barely afford on your own. It is critical for you to have a realistic sense of what you can afford once the divorce is finalized. Mortgages, property taxes, and maintenance can put you in severe financial trouble. Attempting to maintain normalcy when you can’t afford it can become a costly mistake.
Don’t Divide Assets One at a Time
You can miss many important elements of asset division by focusing on each asset individually. Instead, look at a comprehensive picture of your finances as a whole. By piecing property out one at a time, you can miss larger elements of your finances, such as taxes, capital gains, investment losses, and inflation. By understanding how each decision will affect the next, you can have a more complete understanding of how to divide your assets.
If You Count on Child Support or Spousal Support, Insure It.
Your ability to collect alimony or child support is only as good as your spouse’s ability to pay it. If you will be dependent upon these services to continue your quality of life, it is best to request that your spouse obtain disability or life insurance. This will ensure that you and your children continue to be cared for even if your spouse loses their ability to earn. Additionally, if your spouse refuses to pay alimony or child support in direct opposition to the divorce agreement, it is up to you to notify the court.
Understand That Unsecured Debt is Shared
For most Americans, unsecured debt means credit card debt. If credit card debt were wracked up during the marriage, it would become the responsibility of both spouses after the divorce. Credit card companies do not care who used the credit cards during the marriage. They will come after both spouses looking for repayment. It is highly recommended that unsecured debt be paid off before the divorce is finalized.
Don’t Take Their Word About Investments
During the divorce negotiations, your spouse may attempt to convince you to accept an investment instead of liquid assets. This can certainly be a fair trade, but it is best to seek a professional opinion when it comes to risks such as these. Cash, or assets more easily converted to cash, may provide more financial security than investment properties. Also, seek professional help when dealing with assets you don’t fully understand.
Don’t Forget The Retirement Plans
A pension plan or 401k is not designed for beginning to make monthly payments to the recipient until after they retire. However, these types of plans still have value today. During a divorce, both spouses are entitled to a share of the value of the other spouse’s retirement plans. These can mean large payouts depending on how long the couple was married. Furthermore, retirement resources can often be used as bargaining chips. If one spouse wishes to keep a precious shared asset, they can negotiate “buying out” the other spouse with funds from their retirement. This type of negotiation device is known as a distributive award.
Avoid financial mistakes during your divorce by talking to an experienced attorney today. Call The Law Offices of Rusty Williard at (601) 824-9797.