• 10
  • June
    2011

We've blogged previously about how having a prenuptial agreement can help protect your financial assets in a divorce. Now it's time to take a closer look at the impact that divorce does have on your finances.

Divorces are often emotionally charged on both sides of the table, so it is easy to act rashly when making decisions. As a result, there are a number of ways that divorced couples often find themselves in financial turmoil following a divorce.

Often accompanying divorce proceedings is the need for revenge. Whether you feel betrayed or simply hurt by the split, you may be tempted to run up big balances on the credit cards before the divorce is final. But don't do it. In many cases, this will backfire as the court will hold you responsible for the charges and order that you pay the debt.

After a split, it is easy to think that simply because the court ordered your ex to pay a certain debt you are no longer responsible. But that is not always true. Courts can order whatever they like in divorce decrees, but they do not have the authority to make a creditor abide by that order. So if your ex defaults on the mortgage, then your credit will also be destroyed. Financial advisors recommend that you close all co-signed accounts and try to get rid of any jointly-held debts before the split is finalized.

Learning to live on just one income can be challenging, but it is necessary. Following divorce, many people have to adjust their spending habits and lifestyles. If you relied on two incomes to live before, then you will have to adjust your budget and shopping sprees so that you can live on one. It also may be the case that your ex can afford to spend more on your kids. You may be tempted to try out outdo your ex in a war for purchasing your kids' affection. But before you actually buy certain items for your children, stop and question your motivation. You may needlessly run up credit card debt in an effort to unnecessarily prove your love through gifts.

Source: FoxBusiness.com, "Seven Big Post-Divorce Money Mistakes," 6/9/11.