Tag Archive for: financial planning

Common financial mistakes to avoid in divorce

Divorce can drastically affect an individual’s financial circumstances if they fail to take precautionary measures.

Divorce is a deeply personal issue, but using the divorce as a means towards getting revenge can complicate the divorce and be counterproductive. As hard as it may be, experts recommend that couples going through a divorce keep their personal issues with one another out of the negotiations.

Joint credit accounts can pose a major problem after a divorce. According to certified public accountant Jerry Cohen, couples going through a divorce should not maintain joint credit. Cohen recommends closing any shared credit cards in order to prevent a spouse for becoming responsible if their ex fails to make a payment or accrues a large amount of debt.

If possible, all shared credits cards should be paid in full and closed prior to finalizing the divorce. If full payment is not an option, the balances should be transferred to one spouse and the other spouse’s name should be taken off the account.

Couples going through a divorce should not overestimate the persuasive power of a divorce decree. While a divorce decree states that one person must pay off the balance of a previously shared credit card, a credit card company can still hold the other person liable for that balance if the other spouse does not pay. This is because credit card companies are not a part of divorce decrees and will hold all borrowers responsible regardless of marital status. It is generally a good idea to check on joint accounts by running a credit report, which will tend to detect any anomalies and give you a chance to take action before you are exposed to any liability.

Cohen also recommends working with a financial planner to determine what your budget should be after the end of your marriage. Knowing the amount of money that you need in order to live comfortably will help you negotiate properly to ensure future financial security.

Source: Fox Business, “6 Financial Mistakes to Avoid in Divorce,” Teresa Bitler, 3/21/2011

Women must mind money matters after divorce

Some divorce experts say that divorce is harder on women than it is on men — not necessarily on an emotional or physical level, but in a financial sense. This is something people, not only those in Milwaukee but everywhere, need to factor into their plans if they decided to end their relationships.

According to divorce experts, many women lack even basic money management skills. Now, they do not say that because women are not capable of handling their own finances or because woman cannot be independent. Rather, they make that observation because in the division of labor, it is often the male half of a couple who handles the finances. That means the wife may never gets the hands-on experience one needs to become financially literate. This becomes a problem when a couple splits up. If the former husband has always managed the family treasury, so to speak, the former wife may not know how to do necessary things like apply for a mortgage, file taxes, plan investments, etc. And of course, after the divorce, she will need to know how to do these things on her own.

This is really a concern nowadays since the economy is faring so poorly and money is tight for everyone. When the family budget is lean, there simply is not room even for one or two mistakes. Also, the pool of marital assets may have been diminished by the crummy economy, so women may start out with less than they need and may not have the necessary experience to know how to get their own financial picture to improve.

If you are a woman and you are thinking about divorce, ask your family law attorney if he or she has a financial professional whom he or she can recommend. Another option is to look into whether there are financial literacy classes at your local library or community center. How you will manage your finances after you divorce is definitely something you should think about, but there is no reason it should stop you from making this move if you think it is the right step for you.

Source: Reuters, “Divorce stress meets recession mess, and women struggle” Lou Carlozo, Oct. 14, 2011