Divorce isn’t just emotionally exhausting, it can also bring along a financial rollercoaster you weren’t anticipating. Watching friends go through it, I saw just how tricky money matters can get, especially when emotions run high and big decisions have to be made quickly. It’s easy to think you’ll just split things down the middle and be done with it, but the reality is usually a lot more complicated.
When you’re in the thick of it, things like hidden costs, tax surprises, or not budgeting for post-divorce life can hit you when you least expect it. Some people fight hard to keep assets they later realize they can’t afford, others rush through the process only to realize they overlooked important financial details. Avoiding common money mistakes can help you get through this phase a little more smoothly, and with fewer regrets down the road.
Here are 16 financial mistakes people often make during divorce, along with tips on how to avoid them. It’s not about taking sides or getting the upper hand, it’s about protecting yourself from avoidable pitfalls that could impact you long after the papers are signed.
1. Overlooking Hidden Assets
When it comes to dividing assets, things can get tricky. Some people might “forget” to mention certain bank accounts or assets, like a piece of property, that don’t immediately come to mind. This oversight can mean missing out on your fair share.
Hiring a forensic accountant can be a lifesaver here. They can help track down hidden assets, giving you a clearer view of what’s on the table. Knowing every asset ensures a fair split and keeps any surprises at bay.
2. Fighting to Keep the House
For many, keeping the family home feels like holding onto stability. But homes come with significant costs, mortgages, maintenance, and taxes. Often, people fight for the house without thinking about whether they can actually afford it.
Consider whether keeping the house is truly in your best financial interest. Sometimes letting it go can relieve a huge financial burden and open up more options for a fresh start.
3. Forgetting About Tax Implications
Dividing assets sounds simple until you remember taxes. Whether selling a property or cashing out a retirement account, these actions come with tax consequences that could shrink your final amount.
Consult a tax professional early on to understand the impact of splitting or selling assets. This way, you know what you’re actually getting once Uncle Sam takes his cut.
4. Ignoring Joint Debts
While it’s easy to focus on who gets what, it’s just as important to know who pays what. Joint debts, like credit cards and loans, don’t disappear after divorce, and creditors can come knocking on your door if they’re not paid.
Make sure any joint debt is addressed in the settlement. Otherwise, you could be stuck with bills you thought your ex would handle.
5. Not Updating Beneficiaries
After a divorce, most people don’t want their ex listed as a beneficiary on their life insurance, retirement accounts, or will. Yet, people often forget to update these documents, leaving things unchanged.
Take a moment to update these details to reflect your current wishes. It’s a quick task but can save you and your loved ones a lot of trouble down the line.
6. Forgetting About Health Insurance Costs
If you were on your spouse’s health insurance, you’ll likely need to find new coverage. COBRA can offer temporary coverage, but it’s costly, and getting new insurance isn’t always quick or easy.
Factor health insurance into your new budget. It’s often an expense people overlook but it can have a big impact on finances.
7. Rushing the Process
Divorce is tough, and it’s tempting to rush through just to get it over with. But making decisions too quickly can lead to overlooked assets or lopsided terms you might regret later.
Take your time. A thorough, thoughtful approach can prevent costly mistakes and leave you in a better financial position.
8. Relying Too Much on Alimony or Child Support
Alimony or child support can provide essential support, but relying entirely on them can be risky. Situations change, and these payments aren’t always guaranteed.
Build a budget that can survive without these payments if needed. It’s a safety net that can prevent major financial stress if the unexpected happens.
9. Ignoring New Living Expenses
When you’re used to sharing expenses, living alone can be a shock to the wallet. Suddenly, you’re paying rent, utilities, and groceries on your own, which can add up fast.
Creating a budget for these new expenses helps you adjust financially to post-divorce life without unnecessary strain.
10. Not Planning for College Costs
If you have kids, college costs can be a big financial concern down the road. Without discussing it in the divorce, these expenses can become a point of contention later.
Make sure to clarify who will cover college costs as part of the divorce agreement (if any). This can prevent financial stress and arguments later.
11. Assuming a 50-50 Split
Not all states treat assets the same. Some states divide assets 50-50, while others use “equitable distribution,” which considers each spouse’s circumstances.
Understanding your state’s approach to division helps set realistic expectations about the final split. Being informed can help reduce surprises.
12. Not Keeping Track of Legal Fees
Divorce isn’t cheap, and legal fees can rack up fast. Many people end up with sticker shock from the final bill, which drains their savings more than anticipated.
Stay on top of your legal costs, and ask for detailed invoices to avoid surprises. It’s a small step that can save you thousands.
13. Forgetting Moving Costs
Moving out and setting up a new home brings extra costs, from hiring movers to security deposits. Many people underestimate how expensive it can be to get resettled.
Budget for these costs upfront so you’re prepared for the financial hit. A well-planned move can make all the difference.
14. Ignoring Inflation
Inflation might seem minor now, but over a long period, it can eat away at a fixed alimony or child support payment. If your agreement doesn’t consider inflation, it might not go as far in the future.
Ask about cost-of-living adjustments in your agreement. It’s a safeguard that can keep payments relevant as the years go by.
15. Letting Emotions Guide Financial Choices
Emotions run high in a divorce, and it’s easy to make impulsive financial decisions. Some people make big purchases or rush into decisions they later regret.
Try to separate financial decisions from your feelings. A financial advisor can be a helpful guide, keeping you focused on what’s best for your future.
16. Not Getting Professional Financial Advice
Divorce brings complex financial changes, and a professional advisor can help you understand the long-term effects of each choice. This guidance can be invaluable as you navigate this big transition.
Investing in expert advice can prevent costly mistakes and help you create a stable financial future. It’s a decision you’ll likely thank yourself for later.
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With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
