Across the country divorce attorneys are seeing the same patterns: a recently divorced spouse living outside of their means, couples not finalizing property agreements properly and parents fighting for a child’s love through extravagant gifts.
However, with some careful planning many of the most common financial pitfalls that are made either leading up to or right after a divorce can easily be avoided.
1. Spending more than is feasible
For some there may have been a set way of living with both spouses working. However, with only one income, budgeting will have to change.
Along these same lines, many parents will also continue to try to keep paying for a certain activities or private schooling to be able to keep their children’s lifestyle the same. But, if the same amount of cash flow is really not there, those expenses need to really be analyzed and possibly cut.
2. Determine the cost of the marital home
Often one spouse will not take the time to determine what a home is really worth, and just assume that the spouse who is still living in the home will just take care of everything. However, this is not always the case and in some instances the spouse living in the home will just stop making payments and therefore ruin the credit of their ex.
To make sure this doesn’t happen it’s best to either just sell the home and divide the assets equally, or make sure to update all ownership papers immediately following a divorce.
3. Competing with an ex
For many couples who have children there is an urge to compete with the other parent for the child’s love. Often this is done through expensive gifts or trips. However, before paying for a large ticket item it’s important to think about the real reason for the purchase. If it’s just for competition, it’s best to put away the credit card as it may not really be affordable.
Overall these are just some financial mistakes that some ex spouses either make or feel the urge too. In general, when preparing for a divorce or after a divorce it’s important for a person to look at their financial situation both before and after, and realistically note what aspects are likely to change.
Source: Fox Business, “Seven Big Post-Divorce Money Mistakes,” Erica Sandberg, 9 June 2011