Financial Errors To Avoid During And After Divorce
Divorce can be depressing. Your life is upside down, and nothing will ever be the same. Whether it’s the stress, the sense of loss, the belief that you deserve some happiness, or something else, people often make their situation worse by making poor financial decisions during and after their divorce. While it’s impossible not to acknowledge the real strife associated with this upheaval, any responsible friend, family member, and attorney will advise you not to go crazy when it comes to spending.
Create a Financial Plan to Address Your Current and Future Situation
Getting a divorce can cost real money. The median amount needed across the U.S. is about $7,000 to cover attorney fees and court costs, and that number can swell to something much more shocking when the divorce is contested or complex. Sadly, the challenges of divorce sometimes lead people to make impulsive decisions that make this period of life even more costly. That’s why it’s so important that you make a financial plan and stick to it.
Whether you’re feeling depressed or incredibly relieved to be getting a divorce, you should never throw fiscal management strategies out the window. While your former financial plan was tossed out with the ex, your future does require objectives and preparation. So set some financial goals—both short- and long-term– and begin working toward them before you burn through what’s left of your money.
Can You Afford to Keep the Family Home?
Your family home is filled with memories, many of them wonderful, and you simply cannot abide the thought of giving it up. But can you afford the mortgage and upkeep? Think about the insurance and taxes, too. Will the pressures associated with keeping the house outweigh the pleasure of having it? It’s entirely possible that selling the home and splitting any proceeds will be a better way to move forward for both parties.
Don’t Spend What You Don’t Have
The divorce may have left you feeling pretty low, so it may feel as though you deserve to blow a few hundred bucks on new clothes—or several thousand dollars on a new condo or motorboat—but when the bills roll in it may not feel quite so cathartic. So stay away from emotional shopping therapy, because excessive spending will only depress your spirits down the road.
Don’t Try to Avoid Alimony by Quitting Your Job
Are you really going to live in poverty just stick it to your ex? Quitting your job could mean winding up in court, adding expenses and tension to your life. It might be a better decision to simply buck up and make the required payments.
Don’t Pay Bills by Selling Investments
It’s not a good idea to cash out your investments in order to pay your monthly obligations, even if your expenses are escalating during and after your divorce. That’s because your bills will keep rolling in long after the investments are gone. Also worth considering is the fact that you may get hit with some hefty taxes on those sales. Instead, live within your means, either by cutting back on living expenses or by picking up a second job for a while.
Resist The Temptation to dip Into Your 401K
While you are understandably exasperated with your new financial circumstances now that two households are being supported instead of just one, you should understand that if you withdraw these funds, you could be heavily taxed. And if you’re 59 ½ or younger you’ll be assessed penalties to the tune of 10 percent. Try to find another way to deal with your financial situation.
Advocating for You
The experienced, stalwart Baltimore family law attorneys at The Law Office of Hasson D. Barnes are committed to providing informed guidance throughout your divorce. For a confidential consultation, contact our office today.