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Don’t make these personal finance errors in a divorce

| Apr 20, 2020 | Firm News |

In Illinois, couples who get divorced often focus on the larger issues but fail to engage in the right personal financial planning. Sometimes, they will make the wrong decisions or make no decisions at all. This will put them in a compromised financial position as they begin their life after the divorce.

One common error is the decision to try to keep the marital home no matter what. However, the cost of the mortgage plus taxes and insurance can add up quickly. As a result, the spouse keeping home may end up “house poor” having bitten off more than they can chew. Sometimes, the right decision is to sell the house even if it is painful. Another mistake is the failure to update and make a new estate plan during and after the divorce. Each spouse will need a new one to reflect their changed circumstances. This includes updating beneficiaries on all accounts.

A further error involves the failure to properly budget for the new financial reality. Divorce necessarily means than there will be a financial challenge as the same income level now needs to support two homes. However, many spouses simply assume that they will be able to handle the expenses in the same way as possible and that their monthly budget will not change after the divorce.

A divorce attorney is often looking ahead on behalf of their client even when the client is preoccupied with other aspects of the divorce. Sometimes, it is difficult for people to show some forethought because they are in the midst of life changes. The attorney could help the client be proactive and use the divorce agreement to help them plan for the future. This way, the client would avoid making these common mistakes and putting themselves in a bad situation.