Breaking up or getting divorced can be hard to do, but it can be especially difficult when finances are involved.
A new study advises divorced couples to keep a level head and highlighted five mistakes to avoid when keeping finances on track after a break up.
When a couple gets divorced or ends a long term partnership, the overall cost of the separation can be high. Legal fees and the process of creating two separate households from one can be a lengthy and often expensive process.
These sorts of expenses are necessary, but divorce can also prompt consumers to make bad financial decisions and purchases while their emotions are running high. There are five common mistakes that cause divorced couples to get into financial trouble after the break up.
A divorce decree will likely specify which person is to pay for which borrowings. This often leads the other partner to assume that because the debt is in their ex-spouse’s name, they are no longer liable for it. However, divorce courts have no power to make creditors abide by the terms laid out in a divorce. If possible all jointly held accounts and debts should be closed before divorcing.
If one partner relied on the other partner’s income during the marriage, then they may find their cash flow greatly reduced. It is important to budget for your new lifestyle. However, many people, having been unaccustomed to living frugally deny the reality of the situation and continue to shop as before meaning the bills and credit card debts can spiral out of control.
When a home is owned together it is important not to neglect essential paperwork. Especially if one partner is buying out the other’s share. Often the other person’s name is not removed from the paperwork meaning that if the partner taking responsibility for mortgage payments defaults, the other partner’s credit is also affected.
It is common for divorced couples to entertain the idea of ruining their ex partner by running up large bills on credit cards, especially if the divorce was brought about by a betrayal. However, many fail to realize that they too can be held responsible for the balance.
If a couple have children, it can often be the case that one parent comes out of the divorce with more money and is able to afford better things for their children. This can often prompt the other parent to try and out do the wealthier one. However, buying a child’s affection is a sure fire way to get into unmanageable debt.