Financial Considerations of Divorce: 2 Things You Need to Know
Most people understand that divorce is an emotional process, but they underestimate how much of a financial process it is as well. Unfortunately, this often leads to costly financial mistakes and short-sighted decisions that you might regret when everything is done. That's why it's important to consult with a family law attorney right away if you are considering divorce or believe that your spouse may file. The sooner you talk with an attorney, the better off you'll be with your financial plan, but here are a few things that you should keep in mind.
Be Realistic About the House
The marital home is often one of the biggest points of contention during a divorce. It's understandable since it's usually the single largest asset that the couple has. If you're feeling as though you want to fight for the house and you believe that you're entitled to it, you might want to dig your heels in over the house. However, before you do that, you should be sure that it makes financial sense.
For example, think about the mortgage payment and general upkeep costs for the home. Remember that, once you're divorced, your income will be your sole household source for finances. That means taking the time to think about whether or not you can realistically afford the house and the upkeep that comes with it before you insist upon it as part of the divorce settlement.
Consider the Future Value of Long-Term Assets
One of the things that many people overlook in divorce is the potential value growth of long-term assets. As a result, they focus the asset division on the current value of those assets, and that value may be far less than the future growth potential.
For example, a 401k with investment growth may gain value significantly from interest and investment improvement over the time between the divorce and retirement. As a result, you'll lose out significantly on any of that growth value if you simply divide the balance of the asset as it stands now. Talk with your family law attorney about calculating future value as part of your asset division.
Divorce can be a costly process and may prove even more so when you make financial mistakes along the way. That means that you need to be realistic and practical about your financial considerations before you make any permanent decisions. Talk with your family law attorney about these and other important factors to ensure that you make sound financial choices throughout your divorce proceedings.