During a divorce you are going to go through some of the worst times you have ever experienced. That is why many people make financial mistakes, too much is going on all at one time. Making a financial mistake will only make the experience worse. We have prepared this article to help you avoid making costly financial mistakes.
Not Planning For Expenses
A lot of people just spend their money without keeping track of it. This kind of expenditure during a divorce can be risky. There will be extra expenses that you will have to account for. Your lawyer will also need to know how much you spend every month in order to properly defend you. Sitting down and planning out your monthly expenses versus your income is incredibly important.
Not Considering Finances When Deciding Where To Live
Most people want to keep their family home during the divorce process. While this might help you keep positive memories alive, you need to consider your finances. You will no longer be operating monthly with two people’s income. Take a look at the monthly mortgage payments and look at your expenses from above to determine whether or not you can realistically continue to live in your old home.
Not Considering The Bigger Picture
Your finances are not one by one, you rely on them all to help your family. It will be the same thing after the divorce process. It is important that you view all of your financial status as one. If you view everything as one you can see things such as tax, gains, losses, timing, and other effects.
Debt is Still Shared
During a marriage partners are considered to be jointly responsible for their debt and other finances. As such, after a divorce, a lender still views both parties as equally responsible for any outstanding debt. The smart move during a divorce is to ensure that any debt incurred during your marriage is completely paid off during the divorce process. This allows you to start fresh and ensures that you won’t have to worry about someone hounding you for payments.
Pension Plans Have Value Before Retirement
It is easy to assume that your pension plan has no value before your retirement because you don’t actually get to see that money until after you have met the required retirement age. However, a pension plan has value even before you retire. Despite the fact that you need a actuary to determine the value of a pension plan, your spouse is still entitled to a part of that plan’s value.
Not Securing A Qualified Domestic Relations Order
The way that a retirement plan or pension are paid out over the course of your life after a divorce is through a plan administrator. This person looks at a qualified domestic relations order and distributes the money as agreed (or ordered) to both parties. This plan is required for the administrator to distribute the money. It is vital that you set up a QDRO after divorce in order to ensure everyone gets their fair share.
Not Getting A Professional Opinion
Finances are difficult to predict and in a divorce it is easy to become confused about the actual value of different assets. Plus, parties might argue over their actual value and how much that value might increase. If you think that your spouse is asking for is unrealistic, then you should hire a professional to analyze your assets. This will allow you to get an official decision on what assets will be worth.
Looking Only At The Short Term
It is really easy to only look at your short term assets. When looking at your finances it is crucial to think about the long term, how will each asset that is divided affect you down the road. This is something that some people fail to look at even if they aren’t getting divorced. Make sure you take the conscious effort to think about each division of assets.
Despite a divorce being a difficult time in your life, the rest of your life can be even more difficult if you don’t pay attention to your finances. It is important that you take these tips to mind and secure your finances. It is also crucial to ensure that assets are divided evenly as it might come back to haunt you later.