by Andrea McGrath
For most people, the divorce process is mentally exhausting and emotionally draining. Many people describe it as a time of being numb, frozen, or moving in slow motion. Despite that mental and emotional trauma, you will be expected to go through your finances with a fine-tooth comb to ensure that your settlement agreement is fair and equitable. With divorce brain, that’s easier said than done!
Even if you feel like you are clear headed, here are a few of the most common money mistakes to look out for when getting divorced.
Underestimating post-divorce expenses.
You will be asked to do a financial affidavit that reflects your expenses AFTER the divorce. It is critical that you are realistic and don’t leave anything out. This information will be used to determine if spousal maintenance is necessary or not. You must be sure to include everything from your health care deductibles to anticipated home repair charges for the roof you need to replace next year. If you underestimate your expenses by $300 per month, that’s $3600 per year. Where are you going to get that extra money? When you’re the primary breadwinner this mistake could lead you to agree to pay maintenance that you ultimately cannot afford. A Certified Divorce Financial Analyst® will help you scrub your affidavit for errors and make sure that you don’t leave anything out.
Believing that your attorney will handle everything.
Your attorney is an expert in the law, not finances. Would you ask your doctor for advice about your car? No, so why would you expect your attorney to be an expert in finances? The attorney’s job is to ask you to fill out your financial affidavit and take your word for it that it is correct. A good attorney will glance over it looking for any glaring errors but that’s about it. The most commonly mis-valued asset is a pension. And sometimes, the pension is the most valuable asset in a marriage. I often see attorneys accept a present value statement from a pension as the correct value to include as marital property. It’s not. Not by a long shot. A CDFA® can value it properly and make sure that tax ramifications are considered as well.
Letting attorneys do the talking for you.
The more you and your spouse can work out by just communicating, the more money you’ll save. I have seen many couples that could not bear to be in the same room, but consider the cost. If you have your attorney relay information to the other spouse’s attorney, you are racking up bills upwards of $600 an hour because you refuse to talk. This makes sense to no one. Get over any anger and talk about what will work.
Letting your emotions make your decisions.
So many people going through divorce just want to “get it over with.” This is not the time to just throw your hands up and agree to a settlement just to be done with it. This kind of thinking is why divorce so often leads to bankruptcy! A 50/50 split of assets is almost NEVER a truly equitable settlement. So, put the emotions aside and talk to your spouse. Take your time and make sure you thoroughly understand what your future will look like after your divorce and be sure to hire the right experts to help you.