There are several ways to help control and mitigate the short and long-term costs of a divorce settlement by avoiding some of the more common financial mistakes people make in this process. Here are six common financial mistakes and how to avoid them.
1. Not Creating a Budget
When it comes time to work out living expenses, it’s easy to underestimate or overestimate how much money someone may need to get by comfortably. Those miscalculations can lead to someone not able to cover their expenses going forward and further litigation, complaints or issues.
It’s possible to get ahead of this mistake simply by creating a realistic budget. Parties in the divorce should know where all the money goes, down to the last cent. Also, include the expenses of the children if custody is also an issue.
From this, create a budget that shows the reality of the monthly expenses. The budget should also have room for inflation since the costs of things can and will change over time.
2. Keeping Your Home
Most people feel they should keep their home in a divorce settlement. This feeling sometimes comes from an emotional response rather than a practical one. But, consider what a house can often mean. A house potentially comes with:
● A mortgage
● Upkeep costs
● Repair costs
In addition, the house may also carry other costs that made sense when there were more people living in it but can now become a financial burden. If the home doesn’t and cannot fit into the goal of maintaining living expenses and possibly retirement, it’s a potential problem best left on the table.
3. Forgetting About Marital Debts
A divorce doesn’t automatically put an end to marital debts. Any debt accrued while married represents shared debt and is therefore shared liability. Ideally, it’s best to deal with shared debt before reaching the end of a divorce as that will result in one less hassle for everyone to deal with.
A divorce settlement can split marital debt between parties, but creditors can, and probably will continue to pursue both parties equally. It doesn’t matter who initially created the debt — the creditors will want their money. If neither party is paying off the debt, both parties can find themselves with a lower credit score and more hassle because of the situation.
4. Assuming Equal Division is Fair
The monetary value or market value of an asset at the time of a divorce isn’t always a fair assessment of that asset’s worth to each person. An asset that continually increases in value or one that generates income holds more worth than the market value attached to it. Take time to gauge the true value of assets so that a fair division can take place, rather than an arbitrarily equal one.
5. Not Securing and Insuring the Proper Alimony or Child Support
Death or disability can stop alimony or child support cold. If one party cannot pay it, the other party cannot collect it. However, it’s possible to guarantee that payments continue through insurance. A disability or life insurance policy, once modified to account for support, can continue to pay that support out when necessary.
6. Hiring the Wrong Divorce Lawyer
Many of the financial pitfalls associated with a divorce settlement require professional help. Nevertheless, hiring the wrong divorce lawyer can make the process a lot more painful and far less beneficial to all parties involved. Always hire a reputable divorce lawyer with experience, and make sure that experience stems from practicing family law in Florida.
Bergman Family Law Can Help
Bergman Family Law deals with family law in Florida specifically. If you need help with any aspect of a divorce, whether it’s working out financial details or dealing with custody issues, contact Bergman Family Law today.