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Three financial temptations to watch out for during your divorce

Most people going through divorce expect that the process will be expensive. However, they do not always realize that divorce can also be a minefield for costly financial mistakes.

Financial mistakes should be avoided when possible because they can make your divorce and your new life after divorce much more difficult. Although every person may have his or her own financial temptations, there are three common mistakes to watch out for during your divorce.

Indulging in retail therapy

The end of your marriage can be a difficult time for you emotionally. It is important you find a way to cope with your emotions and relieve stress, but retail therapy could cause more harm than good. You may need to replace some items that ultimately end up with your ex-spouse, but it is important to be realistic about your financial situation both during and after divorce. You may be tempted to make large purchases to soothe your emotions or compete with your ex, but it is usually best to avoid making purchases you cannot afford.

Not considering the tax implications of spousal support

If spousal support is a part of your divorce, you may be tempted to focus your attention on the award itself and forget the tax implications of that award. This is a common mistake that can have a significant impact on your financial situation. If you are ordered to make spousal support payments, you will need to also pay income taxes on those payments. If you may receive spousal support payments, keep in mind that your ex-spouse will be paying taxes on those payments at a higher tax rate if he or she is in a higher tax bracket than you. This could result in a smaller spousal support award than you may have otherwise anticipated.

Fighting for the house regardless of the consequences

Many divorcing spouses fight over who will keep the marital house. This can be understandable because a family may have many good memories in a house, it may be less disruptive for young children to keep the same residence and a house may be the most expensive purchase a couple made together. However, many people continue to fight for the house when it is no longer in their best interests to do so. Before trying to keep your marital house, consider if you can afford the mortgage and maintenance expenses on your income alone. You may also consider what other assets you may need to give up so you can keep it.

During your divorce, you may be tempted in a variety of ways to take financial missteps. However, by being conscious of your spending habits during divorce, you can help set yourself up for financial success once your divorce is finalized.

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