What Are the Most Common Financial Mistakes Made During a Divorce?

The divorce process can take a toll both mentally and financially. Expenses can pile up quickly between legal fees and any settlements that are agreed upon. To keep your finances and divorce manageable throughout the process, be sure to avoid these common financial mistakes.

Fighting for the House When not Appropriate under the Circumstances

When selecting what to do with the marital house, make sure you take all of your alternatives into account. It could be advantageous for one side to keep it if they have lived there for a while. That is especially true if its tax base is smaller. It could also be advantageous to sell it, especially if there is any doubt that a person can afford it on their own long-term or that they would have to refinance the mortgage to buy out the other person’s share of the equity.

Shopping

Because divorce is so stressful, so-called “retail therapy” is a common way to take their minds off of their emotions. But this may not be feasible during a divorce. While you might have been able to afford certain items in the past, divorce expenses can pile high, especially if you have to take care of specific bills on your own.

Ignoring 401k Distributions and Taxes

A divorce can drain away a lot of the money you thought you could rely on. You may think that your 401(k) will take care of your immediate financial problems like legal fees, new housing expenses, and that pesky new vehicle payment. If you do not have taxes deducted, however, you risk receiving a hefty tax bill and a 10% IRS penalty if you are under the age of 59 and a half.

Quitting Your Job to Avoid Alimony

Although it may seem like a good idea at first, quitting your job to avoid spousal support payments will ultimately lead to more time spent in court and more money spent on legal expenses. You will most certainly have to return to work at some point in the future. If not, your finances would probably suffer more from unemployment than you would from having to write an alimony check.

Cashing in Investments

When you sell different investments, you could end up having to pay a hefty tax bill if you sell highly valued assets. Additionally, since those assets will not be invested anymore, they will not be assisting you in achieving your different financial objectives.

Don’t Make These Mistakes – Call a Divorce Attorney

If you are getting a divorce and need financial guidance, contact our office to speak with an experienced divorce attorney. We will make sure that you are not pushed into a financial gutter after paying settlements.