The entire divorce process can wear you down, leaving you feeling too emotionally drained to cope. Don't allow yourself, however, to fall victim to the below common divorce financial traps. If you can take the time to put into practice better financial actions, you can help pave the way for you and your children for the future. Read on to learn more about these common financial traps.
You put off financial planning and making a new budget. Your income and debts are likely in a state of flux, but don't let that stop you from creating a new budget. Budgets are meant to flexible, and should be updated frequently whether you are divorcing or not. Make a list of your debts (car loans, credit cards, mortgage, etc) and a list of your assets' value (home, savings account, etc). The difference in these two figures is your net worth, and you can judge how healthy your financial situation is at a glance just by viewing this number. This number, and the lists that you made of your debts and assets, will come in handy when you begin dividing up those things with your spouse.
You automatically desire the family home. There is something appealing about owning real estate, and we have all been taught that "they aren't making any more of it." The issue is not necessarily that getting ownership of the family home is bad, but that you may fail to take into account the associated expenses that come with owning a home. Paying the mortgage is only the beginning; be sure to budget for other expenses like property taxes, homeowners' insurance, repairs, and maintenance. A single large repair bill, such as for a roof or HVAC system, could be disastrous if you don't have a house emergency fund at the ready. Be sure that you are not going to end up being house-rich and otherwise poor.
You don't see past the face value of assets. Property is not just property, it can sometimes represent far more in terms of future worth and value. For example, some assets come with heavy taxation burdens, and some are virtually tax-free. Additionally, some assets will grow in value, and some will decline. Be sure to understand exactly what you are getting when the marital property is divvied up. For instance, while you may not initially desire to get awarded the mountain cabin in the settlement, you must take into consideration the income that could be generated by renting it out.
To better understand how property and debt is divided, consult with a divorce attorney like those at Gordon Liebmann Attorneys at Law.