Divorce may mark the end of a marriage, but it also marks the start of a new future. During divorce, there will be many issues decided which can have a significant impact on this new future. In particular, be on the lookout for things that will impact your financial security. During the divorce process, there are decisions being made that can have far-reaching consequences on your financial well-being. Prepare yourself for the road ahead. Here we will discuss some of the more common financial mistakes that are made during divorce in the hopes that you can take steps to avoid them.
What Common Financial Mistakes Are Made During Divorce?
First and foremost, one of the most common financial mistakes made during divorce is failing to address or failing to properly account for your expenses. During the divorce process, it is essential to take stock of your expenses and develop a budget based on this calculation. Build out your budget for as far into the future as possible. Figuring out where your money is going every month and what your estimated future expenses may look like will help you develop a realistic plan for how you are going to adjust going from what may be a double income household to a single-income household.
Many going through a divorce also fail to account for tax consequences. There will be a variety of tax consequences for you to consider as a result of a divorce. You may see a shift in your tax bracket and make the move to filing as single. Get a firm understanding of things like how spousal support may impact your taxes. You will also want to consider how distribution of the marital assets will impact your taxes.
Another potentially huge mistake people make during a divorce is failing to understand the continued liability attached to unsecured debt. Unsecured debt usually refers to consumer credit card debt. Should such debt be incurred during marriage, it is most often considered to be a shared liability even if the credit card was only in one spouse’s name. During divorce, debts, including credit card debt, will be divided between spouses. Understand, however, that a credit card company can still come after you or your spouse for collection of this outstanding debt, regardless of how the debt was divided during a divorce. That is why it is often best to pay off all or as many debts as possible prior to the finalization of a divorce.
Last of all, do not fall victim to unrealistic expectations regarding your financial future. Take steps to plan out what financial resources you may and may not have in the long term. For instance, make a plan about what you are going to do when spousal support payments or child support payments end. Consider retaining a financial planner to help you with this as well as help you review any proposed divorce settlement agreement.
Florida Family Law Attorneys
At Orlando Family Team, we want to help set you up for a successful post-divorce life by protecting your best interests during divorce proceedings. Contact us today.