Breakups aren’t fun. One thing that can make a divorce even
less enjoyable is dealing with the financial complications that often
come along with it. Many couples don’t pay enough attention to the
impact a divorce can have on personal finances. However, not taking care
of the details can mean big trouble for your financial health for years
to come. Here are three big money mistakes couples make after going
through a divorce.
1. Forgetting to update beneficiaries
Writing | Source: iStock
Before you and your love breakup up permanently, don’t forget to
update your beneficiaries. Check to make sure that your spouse is no
longer listed as the beneficiary on your individual bank accounts, life
insurance policies, and retirement accounts.
Attorney and mediator Daniel R. Burns advises taking a very close
look at all of your benefits. “After I conclude a divorce settlement
with my mediation clients, I recommend that they look carefully at
everything they own, including benefits they have with their employer,
which are often not obvious. Unless their agreement requires otherwise, I
further recommend they change the beneficiary designations
for any retirement accounts, pensions, and insurance policies. Even if
your agreement requires you to maintain your former spouse as the
beneficiary on any of these accounts, it is still a good idea to
complete a new beneficiary designation so there is no doubt about what
you intended. Your beneficiaries will thank you for saving them a lot of
trouble down the road!” said Burns.
2. Forgetting about joint debts
Erasing debt | Source: iStock
Don’t forget about joint liabilities such as
outstanding tax bills, mortgage debt, and joint credit card accounts.
Your tax bill must be paid, your mortgage will likely need to be
refinanced, and your joint credit cards will need to be canceled. Don’t
wait until you receive a past-due notice to start handling your
finances. Otherwise, old debts may come back to haunt you.
“Just as a divorcing couple must divide what they own, so they must divide what they owe. The piper must be paid…Credit
card companies are not bound by a divorcing couple’s property
agreement. In all jurisdictions, joint credit card debt is jointly owned
because each spouse has joint and several liability for the obligation.
Even when one spouse agrees to take on a debt, if it has the other
spouse’s name on it — or in some cases, even it does not — the creditor
has the right to come after both spouses for payment,” said attorney
Michael J. Davis.
3. Not preparing for finances as a single
Man using calculator | Source: iStock
Once you go through a divorce, you’ll have the new task of re-learning to live on one income. Remember to draft a new budget with this in mind. Certified Public Accountant Tracy B. Stewart reminds newly divorced couples to look beyond daily cash needs
and instead think long-term. “Too often, [those] going through a
divorce fail to educate themselves on post-divorce financial issues…
Many [people] getting divorced concentrate only on daily cash needs and
miss the financial big picture…Be sure you look at both the short-term
and the long-term when forecasting what your finances will look like
when you’re on your own,” said Stewart.
Culled from Money & Career Cheat Sheet
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