Divorce is complicated — emotionally, legally and financially. Many of the decisions you make during the process, especially financial decisions, can affect you for decades.
Financial expert, Shawn Leamon, offers insight in this story, “3 Ways to Avoid Money Mistakes During Divorce,” originally posted on this page of his website, DivorceAndYourMoney.com.
A simple mistake can hurt your ability to save for retirement, buy a new home or car, or move on with your life. Focus on these three tips to help prevent common financial mistakes during divorce:
Keep the big picture in mind
It’s easy to forget that divorce is ultimately a business transaction, so you have to keep the big picture in mind. Prioritize the issues most important to you, and let go of the smaller battles.
Even in a simple divorce, you might have to pay attorneys, financial experts, therapists and other professionals. A highly contested divorce can be even more costly. Many expenses come from needlessly fighting over smaller concerns, which are inconsequential to you in the end.
Maintaining your focus should help you keep in-person conversations, emails or phone calls with your attorney brief. Each correspondence adds to your billable hours. You should discuss topics like the emotional aspects of divorce with your therapist, not your attorney.
And though it’s an additional expense, you might want to work with a Certified Divorce Financial Analyst. He or she can help you determine your biggest financial concerns and ensure that your finances are in good shape after the divorce.
Pay down joint debt quickly
You probably share at least one account with your soon-to-be ex-spouse, whether it’s a joint credit card or a mortgage in both of your names. No matter what it is, if your name is on it, you’re legally liable for the debt — even if your ex-spouse is required to pay joint debts as part of the divorce settlement.
Try to pay down any joint debt with joint marital assets while you’re still married, and then close or freeze those accounts. Otherwise, your credit could be impacted if your ex-spouse doesn’t make a payment on a joint debt, even years after the divorce.
Maintain a lifestyle you can afford
It might not be possible to have the lifestyle you became accustomed to while married once you’re a single person. And trying to maintain it after the divorce can be a major financial mistake, particularly if you run up credit card debt or take out loans. To figure out what you can afford, develop a clear budget that takes into account your new income, expenses and lifestyle needs.
Focus on your future
In order to move on with your life after divorce, you have to prepare yourself financially. That means being proactive about avoiding common financial mistakes and doing your best to work efficiently with your divorce team. If you do, you’ll be in a better financial position when the process is over.
Shawn Leamon, MBA, CDFA, is an author, the host of the “Divorce and Your Money” podcast. The original story is posted on this page of his site.