by Brie Reyes
“What are some important financial items to consider when filing for a divorce?” is a question I get asked daily by attorneys and individuals. Each situation is different, but the 3 traps I mention below are ones that I see people fall into most often.
Divorce can be a trap to poverty
Divorce puts you at high risk for poor financial choices. You are likely overwhelmed, stressed, and not keeping track of your finances. For those who have never managed their own finances, this risk is even greater. Speaking with a Certified Divorce Financial Analyst before filing for divorce can lessen the financial shock and help you consider all angles–like your retirement, child support, how to properly assess your cost of living, and life/health insurance.
Divorce hits your credit score
While you were married, you probably shared expenses and it’s common for one spouse to manage the expenses and income. Abruptly carrying these burdens on your own can often lead to a reduced credit score due to inexperience, lack of time, or lowered income. The new expenses of lawyers, child support, and other professionals can cause debt without planning.
Divorce can impact your business
Being married is not only about sharing your life but about sharing your experiences and your finances. It is called Community Property, and it is a 50-50 type of division of all marital properties. You will likely need to divide your business when you divorce.
You may be able to buy your ex-spouse out–this may reduce the harm to your business while you navigate the divorce process.
Divorce can also affect your retirement plans, life insurance, your kids’ college education, 401k, TSP, bank accounts, tax refunds, and pension plans. Always remember that undertaking divorce can be extremely complicated and difficult for everyone involved.