The Biggest Financial Mistake People Make

Start with a Budget

No matter how sophisticated you think you are about your finances, don't pass up the opportunity to set a basic financial budget for your new life. A CERTIFIED FINANCIAL PLANNER™ professional can help you ask important questions that will assist you in understanding what life will be like when you are living with a single income or a temporary income provided by an ex-spouse. The Lilac Tree, an Evanston, Ill.-based not-for-profit organization for divorcing women, routinely stresses that the budgeting process is crucial, since women now outnumber men in filing for bankruptcy and their long-term earnings prospects are generally dimmer.

Find Experienced Divorce Advisers

The choice of attorneys–for men as well as women–should fit the challenges being faced on both sides. Good divorce attorneys definitely cost money, but they pay for themselves when talking with financial advisers in advocating for their clients. Some CFP® professionals are also certified in divorce planning and can help your team with financial discovery, analysis and long-term projections. Among other financial issues, advisers should understand Qualified Domestic Relations Orders, known as QDROs (pronounced "Quad-Rows"), to ensure that pension assets will be shared fairly. 

Properly Value Your Assets

If you're getting the house, does it have a 20-year-old furnace and a roof that's about to cave in? A thorough inspection by a licensed inspector could help. If you're getting the family car, is it past warranty with a funny sound coming from under the hood? If your spouse runs a lucrative business that you've worked for or invested in, how do you know you're getting the right share? Hiring a valuation expert may be necessary. Divorcing spouses need to make sure they have enough money to finance repairs and replacement of assets that they'll be paying for as a single person.

Kids Have Rights

In many states, college-age children have the right to demand financial support or college funding at the state level so their education isn't interrupted. While both parents should advocate in their kids' best interest, this isn't always the case. Be aware of your state's divorce laws with respect to secondary child support.

File Taxes Wisely

There are always special situations in a divorce that will determine whether a couple will need to file jointly or separately during the last year the marriage exists. This is definitely worth discussion since tax fraud can be a liability issue for the spouse who had no involvement or awareness of the fraud taking place.

Get Help Documenting Child Support

Child support guidelines vary from state to state. But generally the criteria for establishing child support amounts is typical throughout the United States and these guidelines are established by each state's legislature. If your state has a special program that allows a spouse to pay into a special account so child support is recorded every month, consider it. It provides a paper trail and enforcement system for assuring that kids get the money they need. Federal law requires all child support payments be made by wage assignment and health insurance by Health Insurance Orders. Child support collection statistics reflect that only 20 percent of non-custodial parents pay their court-ordered child support monthly. That's why so many laws have been established to force compliance. Make sure you know them.

Once the Divorce is Over, Watch the Spending

Budgeting early in the process may cut down on the risk of overspending, but divorced spouses setting up new homes may not be able to resist. For some, spending makes them feel better, and this is one of the biggest reasons ex-spouses face financial disaster after divorce.