Divorce can be a very emotional and overwhelming process. While it’s important to focus on healing emotionally, it’s just as important to protect your financial interests. Many people make financial mistakes during a divorce that can have long-term consequences. In this blog, we’ll discuss common financial mistakes and how to avoid them, so you can move forward confidently.
Whether you’re just starting the process or are in the middle of it, this guide will help you make smarter financial decisions.
1. Not Knowing Your Financial Situation
One of the biggest mistakes during a divorce is not understanding your finances. Many people don’t know what assets they own, how much debt they have, or where their money goes. If this sounds like you, take the time to gather all your financial information.
- What to Do: Create a list of all your bank accounts, credit cards, loans, investments, and property. Also, make a budget to understand your income and expenses.
- Resources:
- Personal Capital (Free financial planning tool)
- Mint (Budget tracking app)
2. Forgetting to Update Legal Documents
After divorce, forgetting to update your will, life insurance, and beneficiaries can create problems later. If your ex is still listed as a beneficiary, they might receive your assets instead of your loved ones.
- What to Do: Review all legal documents and make changes where necessary. Speak with an estate planner if you’re unsure.
- Resources:
- LegalZoom (Legal document services)
- Nolo’s Estate Planning Guide
3. Underestimating the Costs of Divorce
Divorces are expensive—not just in legal fees, but also in terms of dividing assets and setting up a new household. Many people fail to plan for these costs and end up in financial trouble.
- What to Do: Ask your lawyer or mediator for a breakdown of possible costs. Create a financial plan for after the divorce.
- Resources:
- Divorce.com (Divorce cost calculators and advice)
- MoneyGeek’s Divorce Financial Guide
4. Letting Emotions Guide Financial Decisions
Divorce can stir up a lot of emotions, and sometimes people make financial decisions out of anger, guilt, or revenge. For example, keeping the family home when it’s too expensive to maintain.
- What to Do: Focus on what’s best for your financial future, not just the present. Talk to a financial advisor if you’re unsure.
- Resources:
- Betterment (Affordable financial advisors)
- SmartAsset’s Financial Advisor Tool
5. Ignoring Tax Implications
Dividing assets can have tax consequences. For example, selling a house or withdrawing from retirement accounts may trigger taxes that you didn’t expect.
- What to Do: Work with a financial advisor or accountant to understand the tax impact of your decisions.
- Resources:
6. Overlooking Hidden Assets
Sometimes, one spouse might try to hide assets during a divorce. This can leave you with less than you deserve.
- What to Do: Hire a forensic accountant to look for hidden accounts or income if you suspect dishonesty.
- Resources:
7. Not Hiring a Financial Professional
Trying to handle all financial aspects of a divorce on your own can lead to mistakes. A financial professional can help you make better decisions.
- What to Do: Consider hiring a Certified Divorce Financial Analyst (CDFA) to guide you.
- Resources:
- Institute for Divorce Financial Analysts
- WealthRamp (Match with fiduciary advisors)
8. Forgetting About Retirement Accounts
Retirement accounts are often one of the largest assets in a divorce. Failing to divide these properly can leave you short on savings.
- What to Do: Use a Qualified Domestic Relations Order (QDRO) to divide retirement accounts correctly.
- Resources:
9. Not Planning for Life After Divorce
Many people focus so much on the divorce process that they forget to plan for what comes next. You’ll need to adjust to a single income and possibly learn how to manage finances on your own.
- What to Do: Set financial goals for your future and start working on them now.
- Resources:
Helpful Resources to Get Started
- Podcasts:
- Books:
- Divorce: Think Financially, Not Emotionally by Jeffrey A. Landers
- The Complete Guide to Protecting Your Financial Future by Ellie Kay
- Magazines and Blogs:
- Affiliate Resources:
- Rocket Lawyer (Legal help)
- Budgeting Tools on Amazon
Final Thoughts
Divorce is tough, but with the right financial decisions, you can protect your future. Avoid these common mistakes, and don’t hesitate to seek help from professionals and trusted resources. Remember, this is a new chapter in your life, and taking control of your finances is a powerful step toward independence.
For more advice, check out our post on how to create a financial plan after divorce. You’re not alone in this journey—use the resources listed here to make the process easier.
