When you're going through a divorce, the last thing you may want to think of is your financial status. However, your financial situation plays a large part in the process, as well as the aftermath, of your divorce and should be considered every step of the way. Here are four financial mistakes to avoid while going through your divorce that will help you in the long run.
Not Considering Mediation
The mediation process involves a neutral third-party professional mediator that meets with the divorcing couple and helps them reach an agreement on the issues in their divorce. Although mediation is not for every divorcing couple, it does allow for an informal conflict-resolution process that's much cheaper than a typical lawsuit.
Employing a mediator costs significantly less than employing a lawyer, and combined with the much quicker turnaround, you'll be paying less money over a shorter period of time. In addition, for certain types of disputes, many non-profits offer mediation services for free or at a nominal rate.
Not Developing a Post-Divorce Financial Budget
A post-divorce budget will let you know where you stand with your finances, help you avoid getting whacked with surprise expenditures, and keep you on a steady course of financial stability. Understand that any money you receive in your divorce will not last forever, and having a budget will help you stretch every dollar.
Set monthly targets for your spending that align with your new financial goals. Keep your budget somewhere where you’ll see it, such as your phone, to always be reminded to stay on track.
Using Your Divorce Lawyer Too Much
Although a great investment, divorce lawyers are not cheap. Make sure you are only talking to your lawyers about topics that pertain to your divorce rather than seeking personal advice or help. If you need to talk through the emotional aspects of your divorce, or need career counseling or financial analysis, save money on additional attorney's fees and be sure to talk to the right professionals, such as a licensed therapist, vocational expert, or a financial planner.
Not Understanding Taxes Role In Your Divorce Settlement
It's important to remember that after the divorce is final, you may get taxed on the marital assets you received through your settlement. Also, remember only one parent is allowed to claim any children as dependents when filing their taxes which can greatly alter the amount of your tax return.
As part of your divorce decree, you may be paying your now ex-spouse alimony or you may be required to pay child support. Whenever money changes hands in either situation, it’s important to understand the potential impact on your taxes.
Avoid the greatest financial mistake of all and reach out to our legal team. Let our team of experts help you with any additional questions about your finances as a divorced spouse. Be sure to keep a positive mindset as you start to look at your divorce finances. You are paying to find your happiness and that itself is worth every penny.