Top 3 Costly Financial Mistakes to Avoid During Divorce
There are many such cases where a divorcing spouse accepts a settlement even though it could be unfair to him or her. However, a few years down the line, he or she may go through severe financial constraints. Irrespective of what the reason for agreeing to such a settlement was, such an occurrence could be drastically improved even though it may not be avoided altogether. This is possible when you learn some of these most expensive financial blunders that are commonly made while arriving at divorce settlements.
Mistake 1: Unable to budget according to a new lifestyle
A common financial mistake that is made after the divorce is the inability to budget on the basis of one’s new lifestyle. This happens quite frequently, especially when one of the spouses retains the house for his or her emotional attachment or for the kids. The cost of house maintenance and the inadequacy of liquid assets at times lead to a fast disappearance of the cash and ultimately being forced to sell the house. However, a scenario like this can be avoided when you take a close look at your income and liquid assets versus your expenses.
Mistake 2: Unaware of the asset liquidity status
The capability of accessing an asset’s cash value is termed as liquidity. Typically in any divorce settlement, one of the parties is awarded the majority of the liquidity assets like brokerage accounts, retirement plans, and so on, while the other spouse gets a majority of the illiquid assets.
In case a proposed divorce settlement has less liquidity in your name, it means there will be adequate cash flow all through the years for coping up with your living costs. However, if that is not the case, you need to think about disposing of your house or other assets or bring down your expenses drastically so that your budgetary requirements can be met.
Mistake 3: Not exercising adequate control over the insurance policies
A majority of divorce decrees require one of the concerned parties to procure an insurance policy for insuring different types of financial needs such as child support or value of payments made towards alimony. In case you are that person for whom the coverage has been procured, it is vital that you should be either the beneficiary or the policy owner.
If that is not the case, your former spouse who held the policy can simply stop paying the premiums without your knowledge till the time there is a requirement of the insurance policy and it is nonexistent. It could be a financially shattering experience for you.
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