The effort it may take you to move forward professionally, emotionally and personally after a divorce may be so exhausting that you have given very little thought to how you should handle your finances. But regardless of what you feel, it may be time to review your economic choices and finances before you fall prey to common economic pitfalls.
What are the most common mistakes after divorce? According to Lisa Hanson, who operates an adviser for Firstrust Financial Resources, a Philadelphia-based firm affiliated with MetLife, the number one mistake people make after a divorce, especially women, is they fail to create a financial plan.
What does she suggest? The first step is to reassess your financial situation. This begins with understanding your finances, including your debts and assets. But it does not stop there; you also need to establish your financial goals. Without a clear road map of where you are and where you want to go there is no hope you will ever get there. Additionally, there will be real comfort for you once you have a plan.
Experts suggest when analyzing your finances it’s important to start with the basics. Make sure you understand how to create a budget, establish clear financial goals, and create a financial plan.
Finances and keeping your house
Next, experts warn against keeping the house no matter what. Does this mean you have to sell your property, start over and buy a new house? Of course not, in many cases the home should be kept, but experts suggest reviewing why you want to keep the house. If the emotional motivations for order, security and stability match up with your financial goals, then keeping the house may make sense; if not, it may be time to sell it.
Other more pragmatic questions must also be asked. For instance, can you afford to keep the property? How much are the taxes on your property? Can you physically and financially keep up with the maintenance on the property?
Are we properly insured?
The third thing to consider after divorce is whether or not your family is fully insured. If you weren’t responsible for generating a wage prior to the divorce you may have given little thought to your death and how that might affect the family. But now, especially if you are working and caring for the kids, your death could be financially devastating. The need to buy insurance should be discussed before you finalize the divorce agreement.
Should I keep any common joint accounts?
Another common mistake is for couples to keep joint checking, savings and financial accounts. Experts recommend that all joint accounts should be cancelled immediately following the divorce. It’s not that uncommon for one spouse to have serious financial issues following a divorce, running the risk of damaging your credit score.
Not to mention, if your divorce was very contentious it may not be out of the question that they could use joint financial accounts to seek retribution against you and destroy your finances.
What if you are thinking about financial retribution? If the divorce or marriage has been especially contentious, it’s time to “be business like.” Do not damage property and do not run up credit card bills on a joint account. It’s time to put your big girl pants on and eliminate all lingering bitterness. That’s the most important step towards moving on and getting your finances in order.
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