Divorce is tough! We all know that. If decisions could simply be made “by the numbers,” perhaps it wouldn’t be so hard. But there are always extenuating circumstances, and those circumstances generally relate to our emotions.
Let’s examine these most common mistakes divorcing women make.
- Discovery – Failure to get all the facts on the table
It is critical that all relevant information be disclosed. Sometimes this takes some detective work to uncover all bank and investment accounts, current and former employer retirement plans, insurance and annuity policies, the value of real estate, businesses and other physical assets. Fortunately, in choosing the collaborative divorce route, all parties agree to fully disclose all assets, up front.
Information regarding short- or long-term debt would include original loan or credit card documents that indicate in whose name the debt was established, interest rate, and payment schedule, as well as the current amount outstanding. Life, disability, long-term care, and property & casualty insurance policies and statements are also needed.
Without having all the facts, you run the risk of missing some forgotten (or potentially hidden) assets, liabilities or insurance coverage that could make a major difference in your settlement discussions.
2. Taking Stock – Not knowing what you need
“As much as I can get” is a typical response I hear from divorcing clients. However, if you haven’t been managing your household’s finances, you may not be aware of exactly how much income you need to cover monthly and annual expenses for your home, utilities, maintenance and repair costs, transportation, food, clothing, healthcare, education, entertainment and other living expenses. You may want to make a spreadsheet to better organize and understand these expenses.
It may take a little research, but it’s so much better, not to mention the added confidence you’ll have, to go into negotiations with a draft budget outlining real-life household expenditures and the amount of income needed to cover them.
3. Asset or Liability? Believing you have to keep the house
When we talk about assets, I can almost count on hearing, “Well, of course, I’ll keep the house,” as though there are no other options.
However, keeping that house can turn out to be a major liability. By definition, a house is an illiquid asset. That means that it can take time and a fair amount of effort to pull cash out of a house in an emergency.
Who will handle everyday maintenance and repair items? Even in the newest, best maintained houses, things break. Roofs need to be replaced; washing machines leak; and wasps build hives right outside the front door.
4. Using Your Heart, Not Your Head – Forgetting that divorce is a negotiation
Especially if they see themselves as the “wronged” party, many women believe that it’s time for revenge. In other words, they expect to have it all, or at least whatever they want. I call that “weaponizing divorce.”
While it’s okay to be upset, it’s not okay to act on those emotions. This is the time when you absolutely have to use your head, not your heart, to be an effective negotiator. Thinking clearly and logically is critical to successfully navigating your way to a good financial settlement.
5. Pressure – Accepting a bad deal to “get it done”
Remember, there is no time limit on divorce, so take your time. All too often, I see women who just want to be done with it, and so they give in to what turns out to be a bad deal. Please consult with your legal advisor when it comes to making legal decisions.
This is where a little financial modelling and good, objective advice is worth its weight in gold. Few life events are more emotion-filled than divorce. Sound advice and level-headed guidance from knowledgeable third-party advisors can help provide the clarity and objectivity you need to make the best decisions for your long-term financial success.