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Common mistakes may sink your post-divorce finances

by | Oct 29, 2018 | Uncategorized

Life after divorce is often full of uncertainty, especially if the divorce has caught you off guard. You may have fears and concerns about how you will manage when your household income no longer includes your spouse’s earnings or you have to find a new place to live. Other factors, such as alimony and child support, may place an even greater burden on your already stretched budget.

However, some of the financial problems you may face after your divorce can be avoided if you achieve a fair property division agreement and if you are careful not to make common money mistakes. As emotional a time as a divorce may be, it is important that you think clearly and make wise decisions when it comes to your money.

Think it through

You may be feeling a little desperate about your finances, and this can lead to bad decisions. Before you make any big financial changes, it is important to consider all the consequences. For example, you may forget to include the tax ramifications of your decisions. Taking a cash payout as your portion of your spouse’s IRA is one way to unintentionally bump yourself into a higher tax bracket and increase what you owe.

Other common mistakes you will want to avoid include the following:

  • Dipping into your investments or retirement to pay your bills may jeopardize your goals.
  • Fighting to keep the house in the divorce may leave you with a hefty mortgage, property taxes, utilities and other expenses.
  • Relieving your stress with retail therapy may result in you struggling to make ends meet.
  • Refusing to adjust your standard of living to meet your new reality may cause you to dig yourself into a deep financial hole.
  • Insisting on alimony can leave you with higher taxes after the new tax laws kick in in 2019.

While it may seem drastic and spiteful, some spouses have even quit their jobs to avoid paying spousal support. Not only could this trick land you back in front of a Georgia judge paying more legal fees, but it is only a temporary relief. Sooner or later, you will have to go back to work to pay your other bills and put food on the table.

Perhaps the most serious mistake spouses make is to approach divorce without a plan. This includes paying off debt, opening an individual bank account and beginning to build your own credit history. It also means fighting for your rights during property division. It may seem like too much to deal with during this difficult time, but the right attorney can guide you through the process toward a more positive future.