It's only natural to be stressed and emotionally fragile during your divorce, but keeping your head clear when it comes to making financial decisions could make a positive impact for some time to come. You can take some steps right now, while you and your spouse are still negotiating your divorce agreement. Be sure to take some time to consider the impact that making these 3 mistakes could have on you and your childrens' future. Read on to learn more about the 3 financial mistakes to avoid during your divorce.
1. Not making a realistic budget. Many married couples prepare a budget, but that particular piece of work is likely now useless. Not only must you make a new budget, but you should do it as soon as possible. Your living situation may be in a state of flux, but you should create a workable plan that not only helps you ensure that you have adequate income for each month, but for the future. While you are working with your financial issues, take a few extra minutes to complete a statement of net worth. A net worth statement probably sounds a lot more intimidating than it really is. It's just a list of your assets, which is any real estate, vehicles, personal property, bank and investment accounts, and a list of your debts, which include loan balances, credit card balances, etc. The debts are deducted from the assets, creating your net worth. Knowing what you own and what you owe is vital all the time, but especially before you begin making financial decisions during your divorce.
2. Automatically asking for the family home. With divorce being a time of great upheaval, knowing that you, and your children, can stay in a familiar and secure home is a natural desire. While you may think getting awarded the home is a good thing, it may not necessarily be so. If you fail to take into account the financial ramifications of being a single parent homeowner, you may be in for some unpleasant surprises when it comes time to replace that roof, pay the home owner's insurance, or ensure that the property taxes are paid. Being awarded the family home could mean being responsible for a large mortgage payment each month, so take into consideration all costs associated with that responsibility before you automatically ask for it.
3. Not taking advantage of the financial benefit of a QDRO (Qualified Domestic Relations Order). If your spouse has a retirement retirement plan, taking money from that fund can really impact the net amount available. Retirement funds, like a 401(k), are only meant to provide withdrawals (prior to retirement age) for true emergencies and the penalties charged for early withdrawals are often steep and punishing. During a divorce, however, the funds added during the marriage are considered marital property and are available for withdrawal without penalty. You, as the alternative payee, must still pay any taxes owed on the funds, unless you deposit the funds into a new qualifying account.
Talk to your divorce attorney about more ways to help you have a better financial future after your divorce.Share