Going through a divorce can be a very challenging part of someone’s life. Not only does the process typically engulf a large portion of time, it can also take a toll on the mental health of one or both parties. People make decisions under pressure that they sometimes regret after they have time to come to grip with what is going on and make an educated decision, especially when it comes to fiances. Here are some common financial mistakes that people make while going through the divorce process and how to avoid them.
- Marital Debt: Marital debt typically gets split 50/50 during a divorce, even if something is only in your spouses name (with a few exceptions ie. student debt). However, that does not have to be the case. Debt can be settled outside of court, but it is still much better to get out of debt is much as possible before divorce. Your financial situation is about to change so you don’t want 50% or possibly even more of that debt following you. If you don’t try to alleviate debt prior to divorce, at least don’t get yourself in more during the process!
- Keeping the marital home: Just because you want to live in the same house, or even because you “get” the house in the divorce does not mean it’s a financially good decision to keep it. Paying the same bills with only one income is not going to be easy and may not make much sense financially if your putting all of your money into your house. The marital home will, also, remind you everyday of your prior marriage so it may make the most sense, financially and emotionally, to start fresh.
- Spending sprees: Although many people want to reinvent themselves after divorce, don’t do it at the expense of your bank account. A new hair cut and some new clothes maybe, but don’t buy that car that costs as much as a house just because your single now.