Divorce is one of the most painful and difficult experiences in life. When it happens, a lot of things change. You will part ways with your spouse and engage in legal tussles over the custody of kids and division of property and finances. How you handle the divorce process will ultimately determine your financial health and well-being. If you don’t want to plunge yourself into a financial crisis, try to avoid the following mistakes.
Don’t Delay Settlement
Speed is crucial in the process of divorce. Sadly, many people want to go their separate ways, but don’t want to settle their differences quickly. Dragging the divorce process out only intensifies the fight and inflicts more financial pain and greater legal costs on both sides. Don’t let emotions run high and stop you from reaching a settlement. You need to settle your personal differences and reach an agreement on how you will share your finances quickly.
Don’t Hold onto Illiquid Assets
One of the biggest financial mistakes you can make is to hold onto illiquid assets (assets that you can’t turn into cash quickly). Many people hold onto their homes and property for posterity or sentimental reasons without considering their liquidity. What would happen if you receive a chunk of slow moving assets or assets that are locked up for months or years? You will incur maintenance costs, insurance premiums, be encumbered with mortgage repayments costs and property tax on the assets.
Never Use Money as a Weapon
Believe it or not, money is a source of friction in the divorce process. Sometimes, divorcing couples use money as a weapon to exact financial revenge on their partners for the failures and anguish sustained in a marriage. That’s a costly financial mistake and a recipe for disaster. It’s very important for couples to separate their frustrations and emotions from their finances and seek professional assistance to resolve differences that can throw their financial security into jeopardy.
Don’t Rush to Get a Mediator
Given a choice, most parties would want to get a mediator before they go separate ways. That sounds like a good move, since a mediator can make both parties reach a settlement and end the marriage peacefully. From a social perspective, that’s a good decision, but legally it’s tricky. You need to find a competent lawyer, and preferably a CPA, who can sort out the complex financial issues in a divorce.
Don’t Let Emotions Prevail Over Reason
Divorce is an emotional process for both sides whether children are involved or not. Often, couples let emotions prevail over reason. That’s not good for your finances. You’ve got to remain level-headed so that you can make sound financial decisions during divorce. Organize your affairs, estate and finances and take a bold step towards empowers yourself financially. Once you’re emotionally stable, contact your CFA or divorce lawyer to discuss the settlement.
Divorce is emotionally draining and fraught with financial pitfalls. The decisions you make during the process of divorce can affect your well-being and financial security for a lifetime. Don’t make harried decisions, delay settlements, use money as a weapon or rush to hold illiquid assets which are tied up for months or years. That way, you will avoid pitfalls that could you into a lifelong financial crisis. If you’re thinking of getting married, make sure you get a pre-nup from a reputable divorce lawyer before you walk down the aisle!