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15 Money Mistakes to Avoid During a Divorce

Divorce can be a series of financial disasters if you're not careful. Here are the common mistakes people make—and expert help on how to avoid them.

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Hesitating to seek a lawyer’s advice

When divorce seems inevitable, the first thing to do is seek advice from a lawyer not affiliated with your spouse, advises Anne P. Mitchell, Esq, attorney and family law professor—even if you’re hoping to settle out of court. Only an attorney can assess whether your divorce is a good candidate for “alternative dispute resolution” (ADR), and even if things seem amicable, “don’t assume that once the rings come off, they’ll stay that way,” advises Mischelle Copeland, a financial advisor with Wells Fargo. Here are eight secret signs you’re heading for a divorce

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Not hiring the right lawyer

Your attorney should be both an expert in divorce matters and known and respected by other local divorce lawyers, advises Randall M. Kessler, Esq., marital attorney and author of Divorce: Protect Yourself. That said, there’s no need to bring in the “big guns,” says family lawyer, Jessica Markham. “I’ve seen it happen where people hire lawyers beyond their means and then run out of money.” Also, make sure you choose a lawyer whose goals are aligned with yours.

In addition, check out these crucial steps for hiring the right divorce lawyer.

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Failing to be your own advocate

“If you’re in the hospital, you read up on your illness. In a divorce, you’ll want to stay on top of things as well,” says Kessler, who also points out that your input is valuable because you know your spouse and your circumstances better than the lawyer does. At the same time, don’t run up your legal fees by treating your lawyer like a therapist, advises family law attorney Libby James with Horack Talley in Charlotte, N.C. “Multiple phone calls a week can add up to a very large bill from an attorney,” he warns.

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Avoiding the reality of your finances

“One of the first things my divorce attorney did was have me fill out a Statement of Net Worth (SNW),” says Lara Nolan, a recently divorced New Yorker. The process of itemizing your marital property and getting an idea of what will be left after you split it up is routine practice in all 50 states. Some people actually decide to reconcile once they see it on paper. Others, like Nolan, use the SNW as a reality check, but don’t let it deter them from moving forward with a divorce. Check out these money secrets divorce attorneys wish you knew.

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Ignoring the inevitable change in your standard of living

If you do decide to move forward with your divorce, it’s important to accept that your financial circumstances will change. “Embrace it,” advises April Masini, relationship expert, author of four relationship advice books, and the host of Relationship Advice Forum, “or you’ll run the risk of making bad financial decisions.” In fact, certified financial planner Lauren Klein has seen clients make poor decisions such as using retirement funds to finance “keeping the house,” only to see the house lose value and become an enormous financial burden. Here are some of the worst divorce settlements in history.

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Waiting to separate finances

As soon as possible, split up the joint bank accounts, change your passwords, and do whatever else needs to be done to get out of each other’s financial lives, advises Rebecca Zung, Esq., a marital and family law attorney who also offers her services as a divorce transformation strategist (helping people get through divorce and create new lives). Then be sure to check your credit report periodically to make sure there’s nothing unexpected. (Remember: Your ex has your social security number and knows your mother’s maiden name). Here are some of the crazy-but-true reasons people have gotten divorced.

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Making major financial decisions while in the midst of divorcing

“Money is always emotional, but divorce amplifies this reality many times over,” says Carla Dearing, CEO of Sum 180, a financial wellness consultant. Don’t make any major financial decisions until you’re through the ordeal, advises Josh Zimmelman, owner of Westwood Tax & Consulting. “Not only are you not in the right mindset to be making any big decisions, but there might also be legal ramifications to consider. Most importantly, don’t make emotional decisions about non-emotional things, like your finances.”

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Attempting to hide money or assets

If you try hiding money or assets to keep them out of the “marital estate,” you’re risking serious penalties and possible jail time, according to attorney Mitchell. IRS Enrolled Agent, Abby Eisenkraft, who is also the author of 101 Ways to Stay Off the IRS Radar and CEO of Choice Tax Solutions, Inc. “The IRS calls this a fraudulent conveyance,” she notes. “It’s easy to catch, and it’s not tolerated.”

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Quitting your job or reducing your hours

If you already have a job, don’t try to reduce the amount of income you earn in order to try and lower (for payers) or increase (for payees) spousal support, advises attorney Mitchell. “In addition to stiff penalties, if you are found out, courts can impute income if they believe you are intentionally suppressing your income.”

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Remaining unemployed

If you’re currently not working, try to get a job (ideally one with health insurance), advises Joseph Davis, a certified divorce financial analyst and owner of the website Fit Divorce Planning. (This won’t be a concern for the lucky few who can expect to be self-sufficient for the rest of their lives, of course.) “If you are working, look for ways to advance in your career or increase your income since it’s not uncommon for a divorcing individual to need at least a 30 percent increase in income just to maintain his or her standard of living.”

These are some of the top benefits of being divorced, according to those who have been there.

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Keeping the same beneficiaries

“Every year, thousands of divorcees who have neglected to change their wills end up passing away unexpectedly, leading to unnecessary legal drama,” points out Nate Masterson, director of finance for Maple Holistics. As soon as divorce becomes inevitable, change your will to reflect your updated status, Masterson advises, and make sure your children—or whoever is closest to you—will be the beneficiaries. The same is true for insurance policies and retirement accounts, points out Davis.

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Wasting money fighting about child support

“Child support is set by a formula from which courts will rarely deviate,” points out attorney Mitchell. Parents can agree on a different amount, but fighting about it is pointless. And don’t plan your budget based on the amount of child support you’ve been awarded, advises Sonya Smith-Valentine, Esq., president of Financially Fierce, LLC because if your ex fails to pay, it can take months to obtain and enforce a court order and for you to receive any money—during which time you still have to pay your bills.

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Going to court unnecessarily

If at all possible, do not fight about anything in court, advises attorney Mitchell. “There really is no winner, especially if you have children, and you and your children are far better off keeping the money and putting it in a college fund or other account than giving it to the lawyers.” But if you settle out of court, don’t rush the process to cut your legal bills or to simply be done with it, advises Dearing. Make sure the settlement agreement is clear, unambiguous, and satisfactory, advises Zung.

Here’s how to tell your kids you’re getting divorced.

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Not enlisting the help of a financial planner

“If you own your own business, don’t assume your soon-to-be ex won’t be entitled to some portion of it,” attorney Mitchell points out. Another thorny issue is your retirement accounts, which shouldn’t always be split down the middle in a divorce, according to Scott Hanson, CFP, senior partner and co-founder of Hanson McClain Advisors. A good financial planner, particularly one experienced in divorce financial planning, can clarify these issues and more.

Don’t miss these secrets to surviving (and thriving) after divorce.

Lauren Cahn
Lauren Cahn is a New York-based writer whose work has appeared regularly on Reader's Digest, The Huffington Post, and a variety of other publications since 2008. She covers life and style, popular culture, law, religion, health, fitness, yoga, entertaining and entertainment. Lauren is also an author of crime fiction; her first full-length manuscript, The Trust Game, was short-listed for the 2017 CLUE Award for emerging talent in the genre of suspense fiction.