Divorce is a lot like going to the dentist. No one really wants to do it and it's generally a very unpleasant experience, but when things get bad enough, it is often the only solution.
One of the things that makes divorce so difficult is making financial decisions in the midst of extreme emotional turmoil. It is very hard to address the process like a business transaction when you are simultaneously dealing with a flood of negative emotions. However, letting your feelings control your decisions can cost you.
Fortunately, there are many resources available to help you through the divorce process, from your attorney to your therapist and best friend. In addition, avoiding some common divorce mistakes can also help you walk away with a fair divorce settlement.
Keeping the house if you can't afford it
It is not uncommon for one spouse to insist on keeping the house in a divorce. However, if you cannot afford the mortgage payments or upkeep of your Honolulu home, do not make it a priority. Instead consider other options, such as selling it and splitting the proceeds. Trying to hang on to a high-value or high-maintenance asset out of stubbornness, sentimentality or even spite can end up making you the losing party.
Not factoring in tax consequences
Many assets have two values. The first is its face value, for example the amount of money in your retirement account. The second value is the tax value. This is often much lower than the face value because it factors in future tax liabilities. If, for instance, your retirement account shows $100,000, the real value, after future tax payments on the distributions, could be closer to $60,000. When you are working on reaching a property settlement, be sure you factor in future tax liabilities so that you receive your fare share.
Not protecting your alimony
If alimony is part of your divorce decree, keep in mind that it may not last forever. This is especially true if your future ex-spouse is already at an advanced age. In order to protect that income, consider taking out a life insurance policy on your ex. In case he or she dies, you will still receive income from the policy.
If you are considering divorce, it is vital that you avoid making mistakes that can damage your finances. By avoiding the missteps above, you have a better chance of walking away with a fair divorce settlement and a financially secure future.