Financial Literacy

Typical Divorce Money Mistakes

Andrew Hatherley, CDFA®

May 10, 2018

Divorce, for most people, is emotionally draining. Despite the stress, you will be expected to go through your finances very carefully 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

A Financial Affidavit 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 $200 per month, that’s $2400 per year. Where’s that extra money going to come from? When you’re the primary breadwinner this money mistake could lead you to agree to pay maintenance that you ultimately can’t afford. A Certified Divorce Financial Analyst® will help you review 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. 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 miss-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.

“Take your time and make sure you thoroughly understand what your future will look like after your divorce.”

Letting Attorneys Do The Talking For You

The more you and your spouse can work out by yourselves, the more money you’ll save. If you have your attorney relay information to the other spouse’s attorney because you can’t stand talking to one another, you’re racking up bills upwards of $500 an hour because you refuse to talk. This makes no sense. Get over any anger and work it out to avoid money mistakes.

Letting Your Emotions Make Your Decisions 

So many people going through divorce just want to “get it over with.” This kind of thinking is why divorce so often leads to bankruptcy and other money mistakes! A 50/50 split of assets is almost NEVER a truly equitable settlement. So, put the emotions aside, 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.

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Wiser Divorce Solutions

Certified Divorce Financial Analyst (CDFA®), Andrew Hatherley can help you to reach a workable resolution to your divorce so that you can get on with your new life and get started on your dreams.

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Andrew Hatherley is NOT AN ATTORNEY AND DOES NOT PROVIDE LEGAL ADVICE. All information he provides is financial in nature and should not be construed or relied upon as legal or tax advice. Individuals seeking legal or tax advice should solicit the counsel of competent legal or tax professionals knowledgeable about the divorce laws in their own geographical areas. Divorce planning is a fee-only process that does not involve investment advice or securities or insurance transactions.

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