A divorce is a very trying time in your life. After all, your entire life is changing. After having spent years with someone, you are now once again on your own. You may have to live simpler since you are no longer a dual income household. You may have to adjust your whole routine, especially if you are sharing custody of the kids. You may be battling a myriad of emotions as well.
During this difficult time, it can be easy to make mistakes, especially financial ones. Let’s be honest, you’re just trying to adjust so money may not be a priority right now. However, there are some financial mistakes you don’t want to make after a divorce that could cost you down the road.
Petrelli Previtera, LLC is a top-notch divorce law firm with offices in Denver. We serve the entire Denver metro area, including Jefferson, Littleton, and Centennial Counties, with family law services. This includes divorce, mediation, child custody, and alimony. Continue reading about financial mistakes to avoid, and then give us a call for your family law needs today!
Key Takeaways
Financial Mistakes to Avoid After a Divorce
1. Not Putting Together a Financial Plan
For years, you’ve been used to living with a combined income. Most likely, after the divorce, your income will drop considerably, especially if both parties were working. You now need a plan moving forward on how you will spend your new income. First things first: you need a budget. You need to know how much money is coming in and how and where it’s going out. Many people hate this “b” word, but budgets are good for you. Plus, you may need a budget if you are planning on going back to court for alimony.
Petrelli Previtera, LLC notes that it’s not too difficult to put together a budget. You just have to add up all forms of income (work, alimony, child support, and any other income you get, such as from investments) and then take a look at your expenses. You’ll have fixed expenses, such as mortgage or rent, utilities, a car payment, other loan payments, gas, food, and credit card payments. And then you’ll have miscellaneous expenses that vary from month to month, that include things like entertainment, gifts, purchases for hobbies, such as books or on motorcycles, clothing, shoes, and more. It’s often the miscellaneous expenses that can be adjusted the most in order to save money.
Once you have your budget down, you’ll need to start planning for the future. This involves retirement savings (401k, stock investments, and the like) and savings for bigger purchases, such as a new TV, car, or even a new house. Once you have the big picture of your budget and future planned out, you can begin to make adjustments. Perhaps you do need to move to a smaller place or maybe you’ll need to get a full-time job. Whatever the case may be, the sooner you have a budget, the better; otherwise, you could risk getting further into debt without even realizing it until it’s too late.
2. Not Having Life Insurance
You probably had life insurance before the divorce. However, after a divorce, it is even more imperative that you have life insurance, especially if you have children. If you are paying alimony or child support, you want to ensure your children will be taken care of should something happen to you. This goes for the one receiving alimony or child support as well, especially if both of you are working. Plus, even if you think you have enough, having extra money to give to your children to ensure they make it to adulthood financially sound is never a bad idea.
Petrelli Previtera, LLC notes that often obtaining life insurance is part of the court order when alimony or child support is awarded. Regardless, life insurance is affordable and will give you peace of mind. If you did have an existing life insurance policy, make sure you update the beneficiaries to list your children and not your ex-spouse. Do note that if you don’t have kids or other dependents, life insurance is not as necessary of a step.
3. Not Updating Your Will
Many people make a will and then forget about it for years, even decades. However, now that your circumstances have drastically changed, you need to review your estate plan and update your will in order to ensure the right people will receive your assets if you should die. One of the worst mistakes is not updating your will and your spouse is listed as the recipient of all or most of your assets. This not only could endanger your children’s financial future (especially if your spouse has remarried), but your spouse will now receive a windfall you never intended. Imagine, too, if you are remarried; you are now leaving your new spouse nothing.
Petrelli Previtera, LLC, a top divorce law firm, recommends a consultation with our top divorce attorneys, even if you did have a different divorce attorney for your actual proceedings. We’d be more than happy to review your financials with you and make recommendations for adjusting your will.
4. Feeling Guilty About Your Ex’s Financial Situation
A divorce is a very emotional time for many people, and when your emotions are high, you can sometimes make mistakes. One common mistake Petrelli Previtera, LLC sees with regards to finances is feeling sorry for your ex’s financial situation, especially if you hold guilt over the divorce.
It’s not uncommon for your ex to hit you up for some money, especially right after the divorce has been finalized. We often see people give in to these demands by their ex-spouse. This is why we frequently recommend a no-contact period for at least 30 days after the ink has been signed, so that you can have a cooling off period where your emotions can level out. It’s important also to remember that your ex had his or her say in divorce court. Once the divorce is finalized, you don’t owe them anything than what is in the divorce decree. If they persist, you can call up your amazing divorce lawyer, and they can implement legal matters if necessary.
5. Ignoring April 15th like It’s the Plague
No one likes paying taxes. It’s somewhat easier when we pay sales tax and the like because the amount is already added onto the purchase price. However, paying federal and state taxes at the end of the year can be akin to torture when it’s a large amount.
Getting a divorce is no reason to ignore Uncle Sam. In fact, getting a divorce, as long as it’s in the calendar year prior to your filing, will most likely change your tax status, which can change your deductibles, your income level, and the like. Your capital gains exemption will change, your filing status, and taxes on assets sold.
Petrelli Previtera, LLC recommends using a CPA (certified public accountant) for at least the first year after your divorce. If you make a mistake on your taxes (or elect to not pay them at all), the IRS will impose still late penalties on you — which can even add up to more than you’d pay a CPA to do your taxes.
6. Not Separating Joint Finances Completely When You Divorce
Part of this may be the guilt we previously mentioned from the divorce that you feel. However, one of the biggest mistakes attorneys at Petrelli Previtera, LLC see made is accounts kept joint and not closed upon a divorce. Many people still have joint checking accounts, savings accounts, financial investments, credit cards, and loans after the divorce. This can lead to many financial headaches and legal headaches down the road, especially if you find yourself back in divorce court once again. Remember, if a debt is in both of your names, then you are both legally responsible for it, no matter when you legally divorced.
For instance, if your ex charges a bunch on your joint credit card, you still have to pay if he or she doesn’t. While car loans are a bit more difficult to separate, it can be done by refinancing the loan altogether to take the other party off.
We recommend that you close all bank accounts that are joint once all of the checks have cleared and the assets have been divided up by the court, and you open up your own accounts in just your name. That way, your ex has no access to the funds whatsoever.
Even more important, you open yourself up to another round in court over alimony and child support when both of you can see each other’s finances like an open book. You also could be charged by your spouse of violating the divorce decree by taking too much out of accounts on down the road that your spouse believes was his or hers. It’s just a can of worms you’d rather not open when you continue to have commingled funds after a divorce.
7. Discarding Paperwork
Paper is still king in the world of the court system (one of the last few bastions, probably). However, due to the paperless world we now live in, it’s harder and harder to get receipts, bank statements, and copies of legal work from places without paying research fees and printing fees, not to mention the added time it would take to hunt all of that up.
Petrelli Previtera, LLC recommends you keep every last shred of paper from the divorce process with you and don’t discard it. One other perk is that if you were married for over 10 years, you may be eligible for the Social Security benefits of your ex-spouse even if you’re divorced. And if you are taken back to court by your ex for more alimony or child support, you’ll have evidence to support your case.
8. Overspending as Therapy
After a divorce, you are probably emotionally spent. You may just want to take a break from your world and go shopping or take a vacation. While there is nothing wrong with either of these scenarios, spending exorbitantly with the excuse that it is making you feel better can have long-term consequences for your financial health.
That being said, Petrelli Previtera, LLC recommends you do take some time and heal in your way, but just do this in a fiscally responsible manner. Take one vacation instead of multiple, and go on a spa day, not a spa week. You’ll also want to be careful not to self-medicate in other unhealthful ways, such as with food, alcohol, or drugs. If you feel you are on the verge of depression, there are many amazing counselors in the Denver metro area that can help.
9. Going Back to Divorce Court
While we as divorce lawyers love our clients, we want what is best for you in all areas of your living situation, including finances. That means we’d rather not return to court after having overlooked something the first go around. Court fees and attorney fees do add up quickly; hence, really think about what you want out of your divorce and about your future needs. Sure, circumstances can change, including financial circumstances, which can then lead to you being back in court with your ex. However, you want to do your best only to have to go to divorce court one time.
Petrelli Previtera, LLC points out that going to divorce court can be avoided by hiring a great divorce law firm such as ours. When you partner with us, we’ll ensure every i is dotted and t crossed in order to maximize your time in court, save you money, and allow you to move on with your life.
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How Petrelli Previtera Can Help With Your Divorce
As one of the top Denver-area divorce attorneys, Petrelli Previtera, LLC makes your priorities our priorities. With more than 30 years of combined experience, the divorce law team can handle all your divorce issues, from child custody and alimony to the divorce, mediation, and prenuptial agreements. We listen to our clients and their needs and work diligently to obtain a favorable outcome for your divorce. We are very cognizant of the financial toll a divorce can take; thus, we can help educate you on the financial mistakes we see.
The divorce rate in the United States, while decreasing, still remains high, leaving many families reeling from the effects. Our divorce law firm cares. We offer individualized representation that is tailored to your needs. Contact Petrelli Previtera, LLC today to schedule a consultation!