Divorce can present you with many challenges, and many people underestimate how making the wrong financial decisions during this time can continue to affect you for many years down the road. Make sure that you get the support you need to avoid making the financial mistakes below.
1. Failing to perform a realistic evaluation of your financial status. Now is the time to sit down and do a budget, including a forecast for the next year. While you are at it, make a listing of your debts, your savings and your investment accounts.
2. Assuming that getting the house is a good idea. Being awarded the family home is not always in your best interest. Try to take your emotions out of the equation and take a realistic look at the financial burden that home ownership places on you. You may end up with a house and little else if you fail to consider how the house payments, taxes and upkeep could be too costly for you to afford.
3. Dividing up your assets on the basis of their present cash value. It's vital to look at assets not only for what they are worth now, but how they could be used to generate more income, or how certain assets could put you in a better tax situation. Assets such as a rental property, for example, could be a source of income for the future.
4. Failing to understand how credit card debt could come back to haunt you. Creditors aren't concerned about how you split up your credit card debt. If one party stops paying the bill, the other party is responsible. Try to pay off credit card bills before divorcing.
5. Not taking advantage of a QDRO. A Qualified Domestic Relations Order will allow you to access a certain percentage (or all) of certain types of retirement accounts, such as 401(k)s, without either party being charged a penalty. You won't have to pay taxes on it if you roll it over into your own retirement account within a certain period of time.
Giving time and attention to the above items matters now, before the divorce paperwork becomes final, is vital. You may need to consult with a financial planning expert before you sign those papers to ensure that your financial future is as stable as possible. A professional divorce attorney, like those at Burgess, Harrell, Mancuso, Colton, La Porta & Shea, can also be a wealth of knowledge concerning your rights to the marital property. Make good decisions now for a more secure tomorrow.