Before we dive into a handful of avoidable mistakes that can ruin your divorce case, I wanted to talk to you for a moment about the importance of coming up with a budget for your post-divorce life.
I’m sure it has crossed your mind a few (hundred) times since you filed for divorce, but your life is going to be different once your divorce case is over with. Not only will you no longer be living with your spouse, but your children may be living somewhere different as well. Or, your children could be living with you primarily. Whatever situation you find yourself in, it’s likely that you will need to adjust to some changes in your financial life.
The most important change will be that you will go from a dual-income household to one where you are the only breadwinner. Having to adjust to a new schedule, new job, new responsibilities and all of the stress associated with helping your children do the same can be daunting. What can you do to alleviate some of the stress?
One way to alleviate stress is to not allow financial concerns to impact your life. You can start on this path by creating a post-divorce budget for yourself and your family. This is not going to be the most fun thing that you can spend your time doing. In fact, it may even cause a little bit of fear in your stomach if you find out that you have too much month at the end of your money. However, it is better to know where you are likely to stand ahead of time rather than to go into your post-divorce life with no clue where you stand financially.
You will know where you stand at the end of your divorce much better than you do at the beginning or middle, at least from a financial perspective. By the end of your divorce you will have a final order ready to go that lists how your assets and debts will be divided. Next, if you are to pay/receive child support that will be known as well. Finally, you will have a much firmer idea about what your total attorney’s fees will be so a big bill of yours will be coming due as well.
Next, if you have to move out of the home you will have had time to find a new place to live and can start to budget the costs associated with the move. If you were able to remain in your family home you may need to refinance the mortgage or at least begin to make payments from one income on the existing mortgage. Plan all of this out as quickly as you can and you have more of an opportunity to make adjustments to your spending where necessary.
If you have created a budget for your life during the divorce you do not have to completely throw that one aside. Rather, take what you can from it and make changes where applicable. Much of what you paid during your divorce will still be due afterwards, as well. With any luck and with some solid planning your post-divorce life will not be as stressful as you might assume.
Want to avoid some common financial mistakes during your divorce? Keep reading.
It is difficult to learn a lesson and then to apply that lesson. Rather than telling you things that you have to actively go out and do, I thought I would share with you all some mistakes that I have seen other people going through a divorce make in the hope that you will avoid those same problems. While no two divorces are the same, I’m willing to bet that you can avoid many problems most people experience by following the advice I am about to provide.
The first thing I will tell you is to focus on the likely events and to put to the side any concerns you have that are unlikely to come to being. You have enough things to worry about. Do not invent unrealistic worries and then spend a lot of time dwelling on them. You’ll burn a lot of calories concerning yourself with issues like that.
Do not undercount the expenses that you are responsible for
You should know how much money you earn, how frequently you are paid and what expenses you have. These are the basics of budgeting. Where all your money goes by the end of the month is a mystery to many of us. This is why I spent so much time in the blog section prior to this one going over just how important it is to live on a budget. When you are transitioning into a time period in your life you need to avoid potential missteps.
Take a good, long look at the expenses that you have. Do this after the kids are in bed, your phone is put away and the television is off. In other words: avoid distractions. One benefit to not being married is that you are only responsible for your own action now. If you can get yourself to be more disciplined, then that is all you have to worry about.
Develop a budget that you can actually achieve each month. That doesn’t mean that you should give yourself more spending money each month than you need, but you should not make the budget so tight that you cannot spend a little bit on yourself here and there. Use your best judgment when making these determinations.
One other thing I would mention is that Christmas is always in December. Surprise! I mean that you can plan out certain events that you know will occur at specific times in the year. Birthdays, holidays, anniversaries, the date that your life insurance premium comes due, etc. These are all costs that you can plan in advance for. Don’t let them sneak up on you, especially when you have no excuse for it.
Don’t hang onto your family home at the expense of your financial flexibility
The last thing you want to do is lose all sense of normalcy as a result of your divorce. For instance, if you have lived in your family home for a decade it’s probable that you have a lot of memories wrapped up in that house. You may have purchased the home right after your wedding. You may have brought your children home from the hospital to that house. Needless to say your house isn’t any old building to you and your family.
Maybe you were awarded primary custody of your kids in the divorce and you would hate to lose the house. Your kids want stability and consistency when it is all said and done. Your house is a place of safety and calm during the storm of a tough divorce. You have told yourself over and over that you would make sacrifices if that is what it took to keep the house. Before you put yourself in a tough spot financially I recommend that you consider what your future financial outlook looks like if you choose to remain in the house.
Do not let nostalgia and your love for your kids get in the way of you doing what is best for you and your family- now and in the future. Committing to stay in the family home with only one income instead of two can be a difficult thing for you to do. Keep in mind that you are going to have to pay your ex-spouse their share in the equity of the home. This will require that you do a cash out refinance or that you give up an equal portion of the community estate to make the math work.
Your children may have a lot of memories in that home, but you should be confident that you and your family can build memories in a new place, as well. Do not take for granted what sort of bond you all have and the ability for your family to adjust to a new normal. The family home will always be a place for you and your children to make memories- no matter what building it is that you call home.
Plan ahead of time with your attorney to see if you can afford to stay in the family home. If you budget out the costs and determine that it is going to be close, but possible nonetheless to stay, I would recommend that you go in a different direction. You are not giving up on your family or taking a needlessly pessimistic view on your personal finances. You are being smart and reasonable with your money. If it came down to it, you would rather spend that money on your children than on the house.
There is no shame in selling the house, splitting the equity with your spouse and moving on. You can have a clean start and create new memories with your kids in a new home. Budgeting , expenses and all of the other tips that we have already shared with you today should lead you to the decision to not remain in the home unless you are absolutely sure that you can do so comfortably.
Understand that all of the financial aspects of your life are interrelated
Spousal maintenance, child support, attorney’s fees, taxes, income from your first job, income from your side job, investments, equity in the home, and many more issues all represent the way that money comes into and out of your monthly budget. Do not lose track of these by focusing on each individually. Rather, I would advise that you look at each in combination with the other.
Before you settle your divorce you should consider the impact of each financial decision that you make on the other aspects of your case. It is like a domino effect when you take a look at how agreeing to pay certain debts may allow you to retain your retirement account and not force you to partition part of it off for your spouse. With any luck you will come out of your divorce with your finances on straight and a budget in hand to plan the immediate financial future for your family. Do not consider individual financial elements. Instead take them all into consideration and figure out how each one impacts the other.
An inventory is essential for dividing up assets in a divorce
The last thing I wanted to talk about in today’s blog post is how important it is that you have an inventory from the very beginning of your divorce. Odds are that your attorney has asked you to come up with an inventory from the day that you signed up with him or her. Take that request seriously and do an assessment of your assets, both inside and outside of your home. Form there you can have a much better idea of what you stand to lose in a divorce and how much you are willing to negotiate on in terms of your assets.
When you came into ownership of the asset, its value, the amount you paid for the asset as well as other helpful information is a good place to start when inventorying your life. Debts, insurance policies, liabilities on your business, outstanding credit card debts, investments and vehicles should all be inventoried before you start to seriously make settlement offers to your ex-spouse regarding the finances.
Stay tuned tomorrow for more financial mistakes to avoid in your Texas divorce
We will pick up tomorrow where we left off today by discussing additional mistakes that you can avoid to help ensure a better result in your Texas divorce. If you have any questions about the material that we shared in today’s blog post please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week here in our office. These consultations are a great opportunity to receive direct feedback from a lawyer about your specific circumstances.