No one will vouch that getting divorced is a pleasurable experience. It breaks you emotionally as you are splitting from your husband or wife. However, if you are not cautious, divorce may also lead you to being financially drained out. Several individuals have to spend years to get back their life and finances in order after separating from their spouses. So, if you are planning to break up from your partner, then it is important for you to know about the mistakes you should avoid while filing for divorce. Glance through the article to avoid committing some common financial mistakes that can have a negative impact on your credit.
Financial mistakes to be avoided during divorce
Go through the following lines to know about 4 financial or money mistakes which should be avoided by the couples when going through a divorce:
1. Retaining joint credit account: Keeping a joint credit account with your spouse is a sure recipe for a financial disaster. If you have decided to retain the joint credit account with your wife for convenience, then you should reconsider your decision. The reason is, there is no guarantee that your ex-husband or wife will not max out the credit limits or get into debt later on. If your spouse does get into debt, then you'll be equally responsible for repaying it. This explains why the financial experts recommend couples to close their joint accounts before breaking up. Check your credit report once the case is settled and find out whether any wrong information is reported on your credit report. If there are some mistakes, dispute them with credit bureaus.
2. Demanding for the house: It may be true that you want to retain the house in which you have spent a considerable part of your life. You may be emotionally attached to your home or may find the task of renting a new house quite overwhelming. Apart from that, it may also be the case that your children simply refuse to live in another house. In spite of that, it is advised by the financial experts to sell the house and share the proceeds amongst you and your spouse prior to filing divorce. The reason is, it is quite expensive to maintain a big house. A lot of individuals have to fight with mortgage debt problems and foreclosure after splitting up. Selling the house will not only enable you and your spouse to have some cash but also have a tax-free capital gain of around $500.000.
3. Dividing your assets improperly: It is extremely important to divide the assets properly. Should you take a $40,000 vehicle or a $600,000 checking account? Should you take the house? The decision is quite difficult to make. But you have to very careful when choosing the asset. The value of the vehicle will depreciate with time. The market value of the home may also decrease. Moreover, you may not be able to make the mortgage payments properly. So, choose an asset which will benefit you in the long run.
4. Not creating a budget: Budget is the last thing on an individual's mind when going through a divorce. Most of the couples are busy in entangling the legal hassles. However, what these couples don't recognize is that it is impossible to take intelligent financial decisions without creating a budget. So, create a budget to realize the amount you require to lead a healthy life style after getting divorced. If possible, you can also consult a financial expert for leading an organized financial life in future.
You must keep the budget in mind when dividing the assets amongst yourselves. You must check whether the assets you are left with are sufficient for you and your children (if any).
Finally, it is true that a lot of individuals lose their nerve and get emotionally exhausted in the midst of the divorce process. They just get stressed out and want to get over with the case as soon as possible. It is during this time when the individuals make mistakes for which they have to pay dearly later on. So, it is advisable that you should deal with the matter practically. Evaluate your finances in a clean state of mind and try to solve your financial problem before getting divorced.