5 Financial Mistakes to Avoid During Divorce

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Posted January 20, 2014 by Kelley Long in Life After Five
divorce

 

Getting divorced sucks. Believe me, Career Girls – been there, done that. Not proud. You may both be better off in the long run, but there is no avoiding the fact that unraveling a life together is painful and can be financially devastating. Here are the five biggest financial mistakes that I see people make when going through divorce. Try to save yourself further heartache by taking heed.

They stop paying the mortgage or rent because they moved out. If both of your names are on the mortgage or lease, just because one of you no longer lives there doesn’t mean that you’re not obligated to keep paying. The bank doesn’t care about your marital problems. Make sure that he is still paying and if not, you’ll have to bite the bullet and pay. It’s worth it to save your credit in the long run.

They stop making payments on joint credit cards.  Even if your (soon-to-be-ex) spouse runs up the bill taking his new girlfriend out on fancy dates (cancel that card ASAP!), if your name is on the account, you’re on the hook for the money for now. This is a tough pill to swallow, but if you stop making at least the minimum payments until you can get your name off the account, your credit will be in shambles along with your relationship. You can negotiate who will ultimately pay this debt through your divorce agreement, but while you’re in that process, you need to stay current on any bill that has your name on it, no matter who is benefiting from the service.

They keep their money in the joint account. One of the first things you should do when you decide to end your marriage is open up a separate checking account and get some money in there ASAP. With a joint account, either of you could remove all the money and leave the other high and dry, and this is a tactic I’ve seen many men employ to “screw her over.” Don’t risk a nasty argument leaving you penniless until a judge orders your spouse to give you the money back. Plus, the sooner you can start inching your way toward financial independence, the sooner you’ll feel ready to deal with the rest of the fall-out.

They insist on keeping the house when they can’t afford it. Divorce is devastating and unsettling and uprooting, especially if you have kids. I totally get why you would want to minimize that impact by keeping your family in the same home. Unfortunately, I see too many women cling to the family home only to find that after a year they either can’t afford it or they are “over it” and ready to start over. Then they’re stuck with the house and no settlement money.

It’s even more devastating to watch them lose the home (and any equity they had in it) to foreclosure and have to start from scratch. There are financially compelling reasons to keep the house, but if you’re burying your head in the sand about whether you can afford the mortgage once his paycheck is gone, please re-think how badly you need to stay in the house. Give your kids some credit – they’re resilient and can handle a move.

They use their settlement for a financial quick fix. A divorce settlement, whether it’s a portion of his retirement money or just a chunk of your shared savings, is intended to give you your fair share of the long-term savings that you accrued during your marriage. Its purpose is to equalize your chance at being able to maintain the path that you were on toward retirement or long-term financial security. It’s not supposed to be the money that he “owes” you for your lost time together so that you can go on that dream vacation or shopping spree that you could never afford before. Don’t treat your settlement as a windfall, treat it as you did before you were married – long-term savings to protect you in case of financial emergencies.

Becoming financially independent (sometimes for the first time) after a divorce takes work and can be very scary. By avoiding these financial mistakes you’ll be on the road to feeling in control of your financial destiny much quicker. Please let me know in the comments or by emailing me if you have other questions about money and divorce.


About the Author

Kelley Long

Kelley Long is a CPA/PFS and CFP® who believes that the true meaning of financial security means having choices in life. Formerly the head of her own practice, KCL Financial Coaching, Kelley parlayed the knowledge and experience gained from starting her own business into her dream job as the Director of Communications and Marketing for the Chicago-based CPA firm Shepard Schwartz & Harris. She’s also a volunteer and media ambassador for Feed the Pig and 360 Degrees of Financial Literacy. In Kelley’s perfect world, everyone would feel great talking about their money concerns, fears, questions and problems, because then everyone would see that we ALL have those concerns, fears, questions and problems. Kelley lives in Chicago where she also teaches BODYPUMP group fitness classes at the Chicago Athletic Clubs.

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