Common Money Mistakes in Divorce

By Suzanne Chambers-Yates - July 29, 2024

It is easy to make money mistakes in the divorce process because it is emotionally draining and mentally exhausting for most people. It is often described as a time of feeling frozen, numb, or moving in slow motion. Despite the emotional and mental trauma, it's crucial to meticulously examine your finances to ensure a fair and equitable settlement agreement. With "divorce brain," this is easier said than done! Even if you feel clear-headed, here are some of the most common money mistakes to watch out for during a divorce:

1.    Underestimating Post-Divorce Expenses

You will need to complete a financial affidavit reflecting your expenses after the divorce. It’s critical to be realistic and thorough. This affidavit helps determine if spousal maintenance is necessary. Include everything from healthcare deductibles to anticipated home repairs. Underestimating expenses by even $200 per month means an extra $2400 per year. This mistake can lead to agreeing to pay maintenance you ultimately can't afford. A Certified Divorce Financial Analyst™ (CDFA™) can help you review your affidavit for errors and omissions.

2.    Believing Your Attorney Will Handle Everything

Your attorney is a legal expert, not a financial one. They will ask you to fill out your financial affidavit and take your word that it is correct. While they might glance over it for glaring errors, they are not equipped to identify financial inaccuracies. The most commonly misvalued asset is a pension, which can be a significant marital asset. Attorneys might accept a present value statement of a pension as accurate when it’s often not. A CDFA™ can properly value it and consider tax implications.

3.    Not Taking Into AccountTax Implications

Divorce can have significant tax implications for both spouses and are an often overlooked factor. A CDFAâ is familiar with tax issues that apply to divorce.

4.    Letting Attorneys Do the Talking

Direct communication with your spouse can save money. When attorneys relay information between spouses, it can cost upwards of $600 per hour. It's often more cost-effective to set aside anger and talk about what will work directly.

5.    Letting Emotions Drive Decisions

Many people going through divorce just want to “get it over with,” but hastily agreeing to a settlement can lead to financial ruin. A 50/50 split of assets is rarely truly equitable. It's important to set emotions aside, communicate with your spouse, and take the time to understand what your future will look like post-divorce. Hiring the right experts to assist you is crucial for a fair settlement.

Avoiding these common money mistakes can help ensure a more secure financial future after divorce.