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Don't Make These 5 Divorce Mistakes

Divorce is never easy. For most people, the divorce process can be challenging and emotionally charged time. Many people describe it as a time of being frozen, numb, or moving in slow motion. Despite that emotional and mental trauma, you will be expected to go through your finances with a fine-tooth comb. Your financial details will determine whether your settlement agreement is fair and equitable. It is important to approach the financial aspects with care. With divorce brain, that’s easier said than done!

Even if you feel like you have it all under control, here are a few of the most common money mistakes to look out for when getting divorced.

1. Understanding post-divorce finances.

You will be asked to complete 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 include everything from your health care deductibles to anticipated home repair charges. If you underestimate your expenses by $200 per month, that’s $2400 less per year you would receive. 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 can’t afford. Divorce can impact your credit score and overall financial health. Monitor your credit score and establish your own accounts. Create a budget that will reflect your new financial circumstances. A Certified Divorce Financial Analyst™(CDFA®) will help you scrub your affidavit for errors and assist you in making the best, informed decisions possible.

2. Believing that your attorney will handle everything.

Your attorney is not a financial planner; he/she is an expert in the law. 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 misvalued 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 is not the correct value. Not by a long shot. A CDFA® can value it properly and make sure that tax ramifications are considered as well.

3. Ignoring Tax Implications.

Taxes can significantly impact your financial outcome. There are “gross” and “net” values. Net, is what you should be concerned with, as this is the money that will go into your bank account after taxes are paid. Be aware of tax consequences associated with property division and redistribution of investments, such as brokerage accounts and 401K’s. How assets are titled can have a huge impact depending upon whether they are considered martial or separate property. When funds must be liquidated, understanding what the basis and capital gains are becomes critical. You do not want to be paying taxes without prior knowledge. Taxes for a single filer are generally higher than married in the same income bracket.

4. Letting attorneys do the talking for you.

Remember that attorneys work for you. The more you and your spouse can work out on your own, the more money you’ll save. Whatever you agree to is fine and the attorney can advise you if he/she sees something that is detrimental to you. It is your divorce, not the attorney’s. Most attorneys like to keep it simple and divide everything 50/50. This is almost never truly equitable. Don’t let this happen to you. Many couples feel like they could not bear to be in the same room, however, consider the cost. If you have your attorney relay information to the other spouse’s attorney, you are racking up attorney bills because you refuse to talk. Get over any anger and talk with your spouse about what will work for both of you.

5. Letting your emotions make your decisions.

After interviewing over 30 women, the number one regret was “giving in too soon”. 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 often leads to bankruptcy! 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 the divorce and be sure to hire the right experts to help you.

Remember, divorce can be complex. Put together a team of professionals to advocate for you. A divorce attorney, a CDFA® or other experts can help you navigate the process and avoid critical mistakes. Remember, it is your divorce. Stay in control by understanding all aspects of your options.

If you would like more information contact Oscar N. Alvarez CFP®, CDFA® at 757-595-4588 or


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