Divorce may be one of the most difficult and confusing financial events you go through in your entire life.
Avoid these 4 common financial fails to avert a disaster:
1. Failing to prepare a budget.
If you aren’t already using a budget, now’s the time to start. The money that never seemed to be quite enough to support one household is now going to have to support two. Take a good look at how much money you’ll have coming in, and how much you expect to be spending after the divorce.
Most people underestimate what they spend monthly. Keep a log of everything: coffee, fast food, snacks, entertainment, school supplies, gas, the kid’s extracurricular activities, etc. Once you know where the money is going, prepare a budget. If there’s more going out than coming in, you’re going to have to make some adjustments.
2. Failing to sell the home when you can’t afford it.
Deciding what to do with the family home is the most emotional financial decision in a divorce, especially if the children are still in the home. But can you afford to keep the home?
The first question to ask yourself is, “Can I qualify for a new mortgage with only my income?” Then the expense of maintaining the home needs to be considered. Would the monthly payments and expenses fit into the new budget you’re going to have to live within? The cold hard truth is that sometimes the best option is to sell and downsize.
3. Failing to insure alimony and child support.
It doesn’t occur to many people that alimony and child support payments will come to a screeching halt if the payor dies. How can you be sure this won’t leave you in a financial lurch? Consider buying life insurance on the paying spouse to cover support payments in the unfortunate event that they die.
4. Failing to get qualified financial guidance.
The financial decisions you make during this time will impact the rest of your life, and if not handled property, can be devastating. But it doesn’t have to be this way. A Certified Divorce Financial Analyst can give you a roadmap to financial success despite the effects of divorce. I personally give my clients forecasts of their financial futures based on different scenarios. This informs them of potential increases in value of some assets; or taxes and penalties incurred by other assets so they can make educated decisions.
This short list is the tip of the iceberg of common financial fails during divorce. Let Peace Plan Divorce be your guide to avoiding these dangers as you navigate your way through this difficult time. Click here for a free guide: What To Expect When You’re Divorcing With Peace Plan Divorce.
By James Robuck, CDFA™
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