Many people preparing for a divorce overlook the importance of financial planning. This oversight can lead to major financial difficulties and long-term consequences.
Fortunately, proper preparation and attention can go a long way.
Why lack of financial planning is a mistake
Divorce involves dividing assets and debts and addressing future financial needs. When individuals do not plan financially, they may not be ready for post-divorce financial realities. This can include underestimating the cost of living on a single income, not fully understanding the division of debts or failing to account for retirement savings.
For example, many spouses are not fully aware of all assets and liabilities a couple has. A house is one obvious asset and has a median value of $232,100 in Tennessee. Other assets are easier to overlook. This can lead to an unfair division. For instance, one spouse might not know about certain investments or debts that need to be divided. This lack of awareness can result in one party having an unfair financial burden.
Individuals also might not think about long-term expenses such as education for children, health insurance or retirement funds. This can leave them financially vulnerable down the line.
How to avoid this mistake
To get a clear understanding of your financial situation, make a comprehensive list of all assets and debts, including bank accounts, investments, properties and any loans or credit card debts.
Create a new budget based on a single income, taking into account all necessary expenses such as housing, utilities, groceries and transportation. Think about long-term expenses and plan for them accordingly. This includes saving for retirement, education expenses for children and potential medical costs. Seeking professional financial advice can help, too.
Taking these steps can lead to a more equitable outcome and make for a better financial future.
