Divorce is financially taxing, and avoiding common money mistakes is helpful during this challenging time. Missteps in financial matters can have long-lasting consequences, impacting both parties’ financial stability post-divorce.
By steering clear of common financial errors, parties can better protect their financial well-being as they navigate the complexities of divorce.
1. Failing to understand finances
A common mistake people make during divorce is not fully comprehending their financial situation. Gather all financial documents to gain an understanding of assets and liabilities. This includes bank statements, tax returns, investment accounts and property deeds. Without this knowledge, individuals may overlook valuable assets or underestimate debts, leading to an uneven distribution of assets or unexpected financial burdens.
2. Not creating a realistic budget
Another common mistake is failing to create a realistic budget for post-divorce life. Divorce often results in a shift in financial circumstances, necessitating adjustments to spending habits and lifestyle. Developing a detailed budget accounting for housing, utilities and debt payments is necessary. Individuals may struggle to make ends meet without a clear understanding of financial needs and limitations. They may also risk financial instability in the long run.
3. Rushing to settle financial matters
The urge to finalize a divorce can lead to hasty decisions about financial settlements. Rushing to settle may result in accepting unfavorable terms or overlooking important financial considerations. Take the time to review proposed settlements. Consider, too, the long-term implications on financial well-being.
CNBC reports that 70% of women encounter unfavorable financial surprises when they lose a spouse to divorce or death. By avoiding common financial pitfalls, parties can confidently navigate divorce proceedings. They can also reduce the financial impact of this major life transition.
