When you’re going through a divorce, money matters can feel overwhelming. Many women make choices during this tough time that hurt their bank accounts for years. I want to help you avoid that, so here are five big money traps to watch out for… and how to sidestep them.
Fighting Over the Wrong Things
When feelings are hurt, it’s tempting to use the legal system to “get back” at your husband. This rarely works and often leaves both of you with empty bank accounts.
Smart move: Save your energy and money for the battles that really matter. Courts don’t usually punish spouses for bad behavior unless it’s extreme. Ask yourself if winning this fight is worth the price tag.
Forgetting About Taxes
The way you structure your divorce settlement can create big tax bills or tax savings. Common mistakes that women getting divorced make include:
- Not knowing that your tax filing status depends on whether you’re married on December 31, and this status impacts your tax bill bigtime!
- Getting confused about who “claims” the children and what deductions and credits you can take for them
- Missing out on “head of household” tax benefits
- Letting your husband pay you for assets over many years (this can have tax consequences)
Smart move: Talk to a tax professional before signing your final agreement. Ask specifically about:
- How your filing status will change
- Whether you qualify as “head of household”
- Tax impacts of property transfers and support payments
Ignoring Market Changes
Economic ups and downs can dramatically change the value of your settlement.
Smart move: If you’re getting a portion of investments or retirement accounts, consider asking for a percentage instead of a fixed dollar amount. For real estate, think about whether values might drop before agreeing to keep the family home. If you’re selling the home, think about what may happen if it stays on the market for a while, if you’re trapped into accepting a low offer, or whether you might have pay for expensive repairs before selling.
Trying to DIY Complex Legal Issues
While saving on legal fees sounds good, some divorce issues are too complex to handle alone. Do-it-yourself divorce can be a great option for some people with straightforward situations, but don’t be too quick to “go it alone” … to the detriment of your long-term financial well-being. Legal help can be most valuable when it comes to issues like:
- Child support calculations
- Spousal support (especially for long marriages)
- Special needs children
- Income from a business or self-employment
Smart move: Consider getting targeted legal advice just for complicated parts of your divorce, like support calculations or complex property division. This “unbundled” approach costs less than full legal representation.
Making Decisions Based on Emotions
It’s normal to have strong feelings during divorce, but letting emotions drive financial decisions often leads to regret. Try not to accept a bad deal just because you want to “get it over with” or you’re emotionally attached to something. Don’t waste money fighting about small things that won’t matter in a year or two.
Smart move: When discussing money matters, take breaks when feelings run high. Consider negotiating in writing so you have time to think clearly about each offer. Ask yourself: “Would I make this same decision for a friend in my situation?”
Remember, the choices you make during divorce will shape your financial health for years to come. Taking time to avoid these common traps can help you build a more stable future after your marriage ends.
