5 Common Divorce Mistakes That Cost People Money

Divorce isn’t only financially taxing, it’s also emotionally draining. After all, when two people walk down the aisle, exchange rings and vows, and are pronounced a married couple, the last thing on their minds is a life-changing divorce down the road.

But far too many people face this very scenario — a divorce on the heels of wedded bliss.

While there are some unavoidable expenses during a divorce, many people unknowingly make costly errors that end up costing them much more than they anticipated. By learning from the mistakes others make, you exercise better decision-making and avoid many costly errors.

Here are five common mistakes people make when going through the divorce process.

1. Allowing Emotions to Control Financial Decisions

Divorce is a very emotional process, and that’s especially true if the principal parties are going toe-to-toe with no one willing to compromise. While it’s understandable to be emotional, one of the most costly mistakes you can make is allowing your emotions to control decision-making. 

For example, many people end up in legal battles over assets that are not financially substantial, such as furniture, cars, and items of sentimental value. In other cases, people may end up getting a bad financial deal simply to get the divorce over with.

You’ll regret making either of these mistakes. One way you protect your best interests is to choose your family law attorney carefully. A good lawyer will explain what’s at stake, advise you on the best options, and equip you to make the right decisions.

2. Failing to Fully Comprehend the Financial Situation

Too many people don’t know the full extent of their finances, including their assets, debts, income, expenses, and tax implications. That can be a disaster if divorce is on the horizon.

For instance, you don’t want to relinquish a retirement account in return for the family home without realizing the long-term financial implications of the decision. You must know the numbers and weigh the pros and cons before making decisions with long-term consequences.

3. Overlooking Tax Implications

Divorce settlements have various tax implications that may not be immediately apparent. Failing to consider the tax implications may result in financial instability that lingers long after the divorce is finalized.

Common mistakes that people make regarding taxes in a divorce case include the following:

• Failure to consider capital gains taxes when dividing the estate
• Failure to consider the implications of spousal support on taxes
• Failure to consider the implications of dependency exemptions and child-related tax credits
• Failure to consider the implications of the improper division of retirement accounts

A divorce settlement may be equitable on the surface, but could be unfair after taxes have been deducted. If you’re facing a divorce, hiring a good family law lawyer can help you get a fair outcome.

4. Choosing the Wrong Approach to Resolving the Case

Mediation ahead of a potentially protracted divorce can potentially save you money by encouraging cooperation and teamwork. Just because you’re getting a divorce doesn’t mean the process has to be overly contentious.

A good lawyer will help you see the bigger picture so you understand the importance of a give-and-take focus. As long as the two principal parties are willing to be reasonable, it might be possible to skip a drawn-out divorce process that costs a small fortune. 

5. Focusing on Short-Term Outcomes

Another costly divorce mistake is an excessive focus on short-term financial relief. Some people want to maximize their initial financial settlement without considering their future financial needs. That’s a big mistake you’ll want to avoid should you find yourself pursuing a divorce.

For example, keeping the family home may seem like an ideal situation. But it may turn out to be costly in terms of home maintenance, taxes, and insurance with a single income.

It’s important to consider future financial realities when making divorce settlements. This includes thinking about retirement, medical needs, and income potential. A forward-thinking approach can ensure that divorce decisions don’t cause financial problems in the future.

While it’s not possible to avoid all expenses during a divorce, it’s possible to minimize financial losses. Many people lose out on significant amounts of money due to common mistakes during the divorce process.

Understanding these common mistakes can help you make informed decisions that protect your wealth and lay a foundation for future financial security.