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Avoid These Financial Mistakes When Planning Your Divorce

January 23 2015

Divorce Financial Planning in TequestaOften divorce is not just a simple parting of ways, it’s a parting of households. Everything that you once owned together has to be divided between two households now, and that can take its toll on anyone, both emotionally and financially. So how do you navigate through your divorce financial planning and keep the stress to a minimum? Well it’s not always easy, but using these tips to avoid financial pitfalls will help keep you on track to a balanced, low-stress divorce.

Keep your Expectations Realistic

This is often the hardest part of splitting households. Because you have been managing things as a two person household, it can be hard to adjust to providing for everything on your own. “Divorce will put a cramp on your lifestyle” says Violet Woodhouse, author of book Divorce and Money: How to Make the Best Financial Decisions During Divorce. Unless you are the heiress to a vast fortune or long lost princess, expect things to get a little tight for awhile. Remember, you are splitting the household you are used to in half, and you will have to adjust your lifestyle accordingly.

Don’t Cut Corners

Sometimes people are so focused on keeping it simple that they forget to include important information that could affect their financial future. Don’t forget to bring any information or paperwork related to finances, such as retirement pensions, investment funds, and of course all your current assets.

Communication is Key

Not only with your former partner, but your lawyer as well. Be open about anything and everything. Otherwise you’ll just end up paying for it in legal fees later because instead of spending all that time on your case, your lawyer had to waste the time digging up information that you could have told him or her yourself.

Don’t Confuse the Courtroom with the Counselor’s Office

Getting a divorce is emotional, but the courtroom is for settling legal disputes, not personal ones. Turning what could be a quick formality into an endless battle ground not only taxes your emotions, it can tax your wallet as well.

Numbers Aren’t Everything

When getting a divorce, sometimes an even split isn’t always a fair split. The assets a person had when they came into the marriage can be an important factor, as can childcare responsibilities, social obligations, and sometimes even geographical restrictions can all play a part in deciding who will manage what.

Never Forget the Taxman

This is an area that lots of people overlook until tax time comes around and it’s too late. Every portfolio has to pay out a certain amount of taxes to the government each year, but not always the same amount. Two portfolios of seemingly equal value could actually be quite different after taxes are factored in.

Always Assess the Risk

Some people have a higher tolerance for risk than others, and this should be taken into account when dividing up assets. For example, your spouse may not mind taking over a risky stock portfolio that you don’t want to handle, and you may feel more at ease with the security of a bond fund, or vise versa.

Focus on the Future

Don’t just dive straight for what will give you the most money now. Instead, try to keep the future in mind and envision how your decisions will affect you finances 10 years down the road. Once you do that, you might want to rethink taking the car over a mutual fund of the same value. While the car will eventually depreciate in value over time, unless it is a collector’s item, odds are that the mutual fund, if chosen wisely, will not.

Don’t Leave Loose Ends Hanging

Choosing to keep your financial responsibilities mingled after your divorce could be setting you up for disaster. If your former spouse doesn’t make payments, declares bankruptcy, commits fraud, or becomes disabled, you could be liable for picking up the bill. Make sure you have cut or minimized all financial ties with your spouse, even if you plan on remaining friends.

Recreating your Career can Take Time

If you left behind a career when you got married, as is the case with many women in America, don’t expect to just jump back in where you left off. It takes time, money, and patience to rebuild your career from the ground up. Try to make sure your financial plan accommodates a little downtime, that way you don’t have to stress about not making your old paycheck right away.

Do you need help managing your finances during your divorce?
 Contact us for the financial help you deserve!

The CERTIFIED FINANCIAL PLANNERS™ Practitioners and Certified Divorce Financial Analysts™ at Cary Stamp and Company in Tequesta, Florida assist divorcing women with setting realistic expectations, preventing financial mistakes and making crucial decisions. The process allows clients of Cary Stamp & Co. to take charge of their financial lives by empowering them with the knowledge to provide clarity for the difficult decisions before, during and after divorce.