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Financial Mistakes to Avoid During Divorce

financial mistakes during divorce

The divorce process can be a complicated experience, particularly if you have children. You and your spouse must resolve various issues, from spousal support and custody matters to the division of marital property. While you may experience a range of feelings, it is essential that you do not let your emotions get in the way of negotiating a fair settlement. Focusing on reaching a fair settlement makes you less likely to make mistakes that could hurt your financial security moving forward. An experienced divorce lawyer will help you make sure that you avoid common financial mistakes.

What Are the Most Common Financial Mistakes People Make During Divorce?

Often, if you are aware of common mistakes people make and the impact they can have on a divorce settlement, you are better able to avoid those mistakes and reach a fair settlement. You should avoid the following mistakes:

  • Not understanding your marital finances. If your spouse generally pays the bills each month, you may not know how much of your monthly income is spent on things like your mortgage, car payments, utilities, and other monthly expenses. Ensure you can access passwords for all joint accounts and familiarize yourself with your financial status.
  • Underestimating expenses. If you do not thoroughly understand your income and expenses, your spouse may take advantage of you during the divorce. You must review your current expenses and calculate your expected future expenses, taking inflation into account.
  • Failing to consider tax implications. If you or your spouse plans to liquidate 401(k) plans or other investments, acquire property through the divorce, or sell the marital home, there will be tax implications. In addition, effective 2018, the spouse paying alimony is no longer eligible for a tax deduction. Your divorce lawyer can explain these complex tax issues or refer you to an accountant with experience with specific tax-related matters.
  • Making important decisions based on emotions. Often, one spouse feels strongly about keeping the marital home for sentimental reasons without considering whether they can afford the mortgage payments, the costs of maintaining the house, and paying for any major repairs that need to be done.
  • Assuming that the marital property will be split evenly. New Jersey is an equitable distribution state, meaning that marital property is divided in a manner that the court deems fair rather than an automatic 50/50 split. Your divorce lawyer will protect your legal and financial rights and negotiate the best possible settlement outcome.
  • Failing to create a post-divorce budget. It is important to understand the financial impact of divorce on both spouses and that the income that supports one household must now support two. When preparing a realistic post-divorce budget, consider your housing costs, expenses for food, health insurance, transportation, children’s activities, tuition, entertainment, and any debts you have accumulated.

Our Paramus Divorce Lawyers at Torchin Martel Orr LLC Help Clients Avoid Financial Mistakes

If you and your spouse are getting a divorce, do not hesitate to contact our Paramus divorce lawyers at Torchin Martel Orr LLC. We will help you navigate every step of the divorce process and negotiate a settlement that protects your assets and financial future. To schedule a confidential consultation, call 201-971-4866 or complete our online form. Located in Paramus, New Jersey, we serve clients in Bergen, Passaic, Morris, Essex, and Hudson Counties, and northern New Jersey.