Divorce is emotional and exhausting. And when you are trying to make life-changing decisions in the middle of all that stress, it is easy to overlook the long-term financial consequences. Unfortunately, some of the most common mistakes people make during divorce are financial—and they can affect your future far beyond the final decree.
Here are seven financial missteps to watch out for, and how to avoid them:
These Financial Mistakes During a Divorce Can Be Long-Lasting
1. Not knowing your full financial picture
One of the biggest mistakes is going into the divorce process without a clear understanding of your finances. That includes assets, debts, income, expenses, and retirement accounts. If you do not know what you have (or what your spouse has), you cannot negotiate a fair outcome. Take the time to gather all financial records and work with professionals to uncover anything that might be missing.
2. Underestimating living expenses
Once you are living on your own, your expenses will change. Many people underestimate how much it will cost to maintain their lifestyle post-divorce, especially if children are involved. Creating a realistic budget early in the process can help you prepare and make smarter decisions about what to ask for during settlement discussions.
3. Fighting to keep the house without thinking it through
The family home can feel like a source of comfort, especially during a time of loss. But keeping the house is not always the best financial move. Can you afford the mortgage, taxes, insurance, and upkeep on your own? Sometimes, selling the house and splitting the proceeds is a more practical choice.
4. Overlooking hidden or complex assets
Retirement accounts, stock options, pensions, and business interests can be tricky to divide. They are, however, often among the most valuable assets. If these are not appropriately addressed, you may end up walking away with far less than your fair share. Make sure you understand the tax implications and long-term value of every account or investment on the table.
5. Forgetting about taxes
Not all assets are equal once taxes are factored in. For example, taking a cash account instead of a pre-tax retirement account may sound fair on paper, but the tax burden down the road could make it a lopsided deal. Work with a financial advisor or attorney who can help you understand the after-tax value of any proposed settlement.
6. Not considering long-term financial goals
It is easy to focus on immediate needs during a divorce, but do not forget about your long-term financial future. How will this agreement affect your ability to retire, pay for your child’s college education, or rebuild financially? Every decision should support your goals for stability and growth—not just getting through the moment.
7. Trying to handle it alone
Divorce is complicated, and financial mistakes made now can take years to recover from. Trying to navigate it alone to save money up front often ends up costing more in the long run. Surround yourself with the right professionals, including an experienced attorney, who can help you protect what matters most.
Divorce is a legal process, but it is also a financial turning point. Avoiding these common mistakes can help you walk away with the stability and clarity you need to start your next chapter with confidence.
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