A divorce can change many aspects of your life, including your financial situation. When you can no longer depend on a second income, you may not be able to afford a lot of the things you did when you were married. However, if you are proactive about your finances ahead of time, you can make the transition a little easier. Avoid these seven financial mistakes as you go through the divorce process.
1. Not Gathering All of Your Financial Documents
If you know for sure that your marriage is over, find and organize your financial documents as soon as possible. These documents may include tax returns from the last three to five years, bank statements, retirement accounts, life insurance policies, and stock portfolios. Your divorce attorney will want to look at these documents to get a clear picture of your assets and determine if they may cause issues in your case.
2. Not Closing Joint Credit Cards and Loans
Once you have decided to get a divorce, you need to close all the credit cards and loans you opened with your spouse. Otherwise, your spouse could run up more debt on these accounts and leave you responsible when the divorce is finalized. Even if you and your spouse are on good terms right now, you never know if he or she will struggle financially throughout the divorce and rack up debt.
3. Keeping the Family Home
The home you raised your family in has a lot of sentimental value to you, and that's understandable. However, if you can't afford the mortgage, insurance, property taxes, and maintenance costs, the home may not be worth hanging onto. It might make more financial sense to sell the home and move into a more affordable house or apartment.
4. Failing to Consider Your Financial Future
When you were married, you may have gone on vacations every year, dined at fancy restaurants, and had your nails done once a week. After a divorce, you might not be able to maintain the same lifestyle, even if you receive alimony from your spouse. That is why you should look at what your income and expenses will be and create a realistic budget.
5. Not Insuring Alimony Payments
If your spouse was the breadwinner in the marriage, the judge might award you alimony. However, if your spouse becomes disabled or dies, you will no longer receive support. Consider requesting that your spouse purchase disability and life insurance policies to guarantee payments if he or she develops a debilitating disease or dies.
6. Failing to Pay Off Debt
If and your spouse built credit card debt while you were married, both of you will be responsible for repaying it. Pay off all of your debt before the divorce is finalized in order to save yourself from potential headaches down the road. That way, you can have a financial fresh start and not have anything hanging over your head.
7. Forgetting to Change Your Will
Don't wait to remove your spouse from your will. If you keep putting it off, it could come back to haunt you later. For example, if you remarry and then die, your first spouse will receive your assets and your new spouse may get nothing.
If you avoid making these common financial mistakes, your life will be easier after your divorce. If you have any additional questions concerning your divorce, consult with an experienced family attorney. He or she can review the unique aspects of your case and advise you on the best way to proceed. Contact the Ezim Law Firm to schedule a consultation.