A divorce is painful on its own as you have to say a final goodbye to a dream you once had as a couple in love. There’s no need to deepen the stress with financial issues.
1. Most Common Financial Issues of Divorce
A divorce can be financially damaging in addition to its detrimental effect on the spouses and their family. During a divorce, you and your spouse will be forced to make some unpleasant decisions that have a major impact on your financial situation and your future. Unfortunately, if you haven’t separated on good terms, this can get ugly as such procedures tend to trigger the worst in people.
Many ex-couples come to a relatively amicable agreement about the division of property, but if there is disagreement about one or more items, there are a number of fair methods for deciding who gets what.
Deciding who will be responsible for any debt the couple has incurred during their marriage is often much more difficult.
As people get caught up in dividing the property and fighting over custody issues, they often neglect the tax implications of their divorce. This is where a tax professional or a CPA comes in handy.
2. Financial Mistakes To Avoid In Divorce
With so many things on your mind as you try to create your new life and emotions getting the best of you, it’s easy to forget about your new financial reality. But, it’s critical to prioritize your finances during this process and be aware of some common mistakes that divorcees make as they can cost you.
Ignoring your expenses
Divorce is expensive. You need to make sure you will be able to cover your future living expenses as you will now only have your own income.
Not standing up for yourself
As painful as it is, you need to fight for your best interest.
Splitting everything 50/50
As fair as this arrangement may sound, things are never this simple. Some assets are more liquid than others. Some assets like a property pays ongoing dividends. For assets to truly be divided evenly, this division has to be done by taking into account the benefits, ongoing returns, and taxes.
Everything is going to change, from your lifestyle to your tax situation. But emotions won’t do you good here so do your best to approach the situation with an open mind.
3. How To Rebuild Your Finances After Divorce
Once the marital settlement agreement is reached, you will probably want a relief from paperwork, lawyers, or even thinking about your finances. But, the sooner you start thinking about rebuilding your finances, the better.
Check your credit score and improve it if necessary
Check your credit score at all three credit bureaus. If you spot errors, report them immediately as a weak score can make it difficult to get a new place to live or even a job.
Lower your bills
Lowering your bills is an easy way to make sure you can pay your bills on time and protect your credit score. Search for affordable electric providers to lower your utility bill that eats a big portion of your monthly budget. Even if you are staying in the same place, you may still want to reevaluate your plan because rates tend to fluctuate based on KwH usage as in many cases the lower the kwh usage, the higher the rate.
Create your safety net
Now that you are single, it is more important than ever to have a safety net in the form of three to six months of living expenses.
Create a new plan
What are your new life goals? Create a budget that supports them and develop an action plan to achieve them. Moving on after divorce is bitter-sweet, but you deserve to enjoy whatever life has in store so let your imagination heal your wounds and dare to dream a beautiful future for yourself.
Takeaway – From working out new dynamics to creating a game plan for your new lifestyle, you will have a lot on your mind. A divorce is an emotionally challenging process so the least you can do for yourself is make sure you are also not financially vulnerable.