Divorce is something no one wants to go through, and when emotions are running hot, it can be pretty difficult to consider the financial implications of your separation. However impactful divorce may be emotional, your finances will also suffer great change for the worse if you’re caught unaware or let emotions get in the way. Here are five finance mistakes to avoid during your divorce.

1. The “New Car” Trap

This actually happens quite often; a freshly divorced person will want to “treat” themselves to a new car or other expensive items, without considering the true cost of the item or the impact it can have on the divorce itself. This is referred to as retail therapy. Purchasing big-ticket items is generally not a good idea until after the divorce is 100% finalized, and only if you have a good financial plan in place.

Adding extra monthly expenses to your budget can only serve to dig a deeper financial trench; especially if you got the short end of the stick as far as finances go. Remember that once you split, those expenses you tackled as a team will be split as well, and you’ll have to handle your own finances from now on. Buying a new car or luxury yacht is probably not a good idea until you’ve got your finances figured out.

2. Poor Planning

Many people enter a divorce without a financial plan in place for when everything is finalized. Whether this is because of poor money management skills or simply not thinking about planning ahead, the impact can be the same. You’ll want to have some kind of plan in place for when you’re divorced for good; since you’ll be handling all of your expenses on your own from then on.

Start with putting together a simple monthly budget. This can help you analyze your expenses and figure out where you can start trimming down on them; as well as how much income you bring in every month and where it’s best allocated. A clear financial picture is worth much more than the piece of paper it’s written on, and it can help save you from financial ruin later on.

If you need help putting together a more solid financial plan, or just aren’t great with finances, to begin with, you may benefit from hiring a financial advisor. You can use the Careful Cents site to compare the best financial advisors in San Jose and elsewhere with the click of a button.

3. Fighting Tooth and Nail for the House

Probably one of the most sought-after items in a divorce, and also the one that causes the most bitter of arguments, is the house. You’ve both lived there for x number of years, have invested money in it, etc. While it’s understandable that something like your home has a lot of sentimental and financial value, often the fight isn’t over those things; but is a stirring of emotions.

Letting emotions get in the way during your divorce can slow things down and make small discussions into bitter arguments with no resolution. It’s understandable that divorce is an emotional process, and while it can be incredibly difficult to keep your cool when your soon-to-be ex-spouse is pushing all the wrong buttons, emotions serve only to cloud judgment and make things more difficult.

If it looks like you’re going to lose the house, fighting for it may change the situation, but you’ll end up running an entire household on your own; complete with property tax, maintenance, mortgage payments, and any other expenses. Sometimes, it’s better to just let things go and start over. You may win the house and find that the memories it holds alone are enough to drive you out!

4. Forgetting About Taxes

Not speaking with your accountant or tax expert about how your divorce will affect your filing is a critical mistake many people make during a divorce. Your common enemy during a divorce is the IRS, so you’ll want to at least try to be amicable enough to speak with your spouse about taxation and how you’ll be filing next year.

Property division has different tax implications depending on the value of the property and how much you’re splitting. This applies to investments, home loans, etc. Don’t leave taxes to the wind during your divorce. If you have to hire an accountant for an accurate picture of things, don’t be afraid to do so.

5. Financial Ignorance

If you’ve let your spouse handle all of the finances throughout your entire marriage, you’ll be financially ignorant at the end of it; which can be detrimental to your own interests. If you don’t know what you have, how can you fight for any of it?

The best thing you can do it start making a record of shared expenses as soon as possible. Ideally, you’ll have already asked your spouse to include you in the finances, but this isn’t always the case. Without information on your joint assets, you’ll be left at a disadvantage when it comes to the settlement process.

Conclusion

Divorce is an emotional process for everyone, but with the right planning, it doesn’t have to be a financial nightmare as well. If you don’t win the house, welcome your newfound financial freedom; you no longer have a house to maintain. Sometimes the best thing to do during a divorce is to just let things go.

Author's Bio: 

Md Rasel is a professional blogger.