Many people worry about the legal fees associated with getting divorced, but there are many other long-lasting expenses related to your divorce. Whether you are the primary breadwinner or a stay-at-home parent, your cost of living will increase after a split.
If you believe divorce is in your future, you should start carefully planning for your finances. Below are six common mistakes to avoid.
Assets and Property
In many marriages, one spouse is put in charge of supervising the finances. However, when the relationship begins to fall apart, it is imperative for both spouses to have a clear picture of their overall financial situation. This includes understanding what your family’s assets and debts are. You can begin doing your due diligence by reviewing tax returns, statements for bank, investment and retirement accounts, paystubs, and taking an inventory of real estate, collectibles and other valuable assets. If you own a family business, you may need professional help to ensure that you get your fair share in the division of assets.
It is natural to want to fight to keep the marital home, especially if you will have primary custody of the children, but this may not make financial sense. If your home required two adults to afford and maintain, it may be too costly for you to afford on your own. Letting go of the home can be difficult, but it is not worth depleting your savings, especially if it will only postpone the inevitable.
In addition to understanding the cost of maintaining the marital home, you should also be aware of the costs related to daily living expenses. This includes how much you spend on clothing, food, utilities, gas, and other necessities. You want to make sure you can cover such expenses after your divorce. And remember, as much as you prepare and plan, there will always be unexpected expenses.
When dividing the marital assets, you should confer with your attorney regarding how the different accounts and assets will be treated at tax time. It can make a significant financial difference if you receive an after-tax investment account versus one that is a tax-deferred account.