15 Money Mistakes to Avoid During a Divorce
By Lauren Cahn
The following content appeared in Reader's Digest on June 6, 2018.
Divorce can be a series of financial disasters if you're not careful. Here are the common mistakes people make—and expert help on how to avoid them.
Hesitating to seek a lawyer's advice
When divorce seems inevitable, the first thing to do is seel advice from a lawyer not affiliated with your spouse, advises Anne P. Mitchell, Esq., attorney and family law professor—even if you're hoping to settle out of court. Only an attorney can assess whether your divorce is a good candidate for "alternative dispute resolution" (ADR), and even if things seem amicable, "don't assume that once the rings come off, they'll stay that way," advises Mischelle Copeland, a financial advisor with Wells Fargo.
Failing to be your own advocate
"If you're in the hospital, you read up on your illness. In a divorce, you'll want to stay on top of things as well," says Kessler, who also points out that your input is valuable because you know your spouse and your circumstances better than the lawyer does. At the same time, don't run up your legal fees by treating your lawyer like a therapist, advises family law attorney Libby James with Horack Talley in Charlotte, N.C. "Multiple phone calls a week can add up to a very large bill from an attorney," he warns.
Avoiding the reality of your finances
"One of the first things my divorce attorney did was have me fill out a Statement of Net Worth (SNW)," says Lara Nolan, a recently divorced New Yorker. The process of itemizing your marital property and getting an idea of what will be left after you split it up is routine practice in all 50 states. Some people actually decide to reconcile once they see it on paper. Others, like Nolan, use the SNW as a reality check, but don't let it deter them from moving forward with a divorce.
Ignoring the inevitable change in your standard of living
If you do decide to move forward with your divorce, it's important to accept that your financial circumstances will change. "Embrace it," advises April Masini, relationship expert, author of four relationship advice books, and the host of Relationship Advice Forum, "or you'll run the risk of making bad financial decisions."
In fact, certified financial planner Lauren Klein has seen clients make poor decisions such as using retirement funds to finance "keeping the house," only to see the house lose value and become an enormous financial burden.