Your financial situation is likely one of the last things on your mind when you are going through a divorce. Properly dealing with stress and other emotions commonly associated with divorce is important, but you also need to be mindful of your expenses. It is very easy to make financial miscues during a divorce that could put you in a difficult position for a long time.
Divorce is a challenging enough situation as it is. You do not want to make it any harder on yourself by putting yourself behind the eight ball financially. Fortunately, this is something that is well within your control. Being aware of financial pitfalls and practicing smart spending habits can help keep you afloat as you navigate your way through a divorce.
Underestimating potential expenses
Entering into a divorce will dramatically change a lot about your life. You may have grown comfortable with the amount of money you earn each month and how much of it will go toward paying bills. The various expenses associated with divorce have the potential to throw a wrench into your routine.
It is important that you take the time to manage your financial situation. Take a look into your monthly spending and properly manage it accommodate unexpected expenses. This will help ensure that you are prepared for anything that comes your way during your divorce.
Using investments to pay bills
Unexpected bills can be a pain. They force you to shuffle money around and make financial maneuvers that you otherwise would have avoided. One common mistake that people make when going through a divorce is emptying their investment accounts in order to pay divorce expense bills. You may not feel like you are taking a hit financially, but you could face a substantial tax issue in the future.
Depending on your situation, there could also be withdrawal fees that could put you in a dangerous spot financially. It may seem like a good idea at the time, but your bank account will suffer long-term if you decide to pay these bills with your investment money.
Retail therapy always has the potential of exhausting your bank accounts, but this mistake is especially common for people going through a divorce. You may be celebrating your freedom or attempting to cope with losing someone special in your life. Regardless of your specific situation, your goal should be to avoid any type of unnecessary spending.
The simple rule of thumb here is that if you do not need it, do not buy it. Making a substantial purchase to feel better about your situation may be emotionally helpful in the present, but you may look back on this decision knowing that it set you up for future financial stress.