In the midst of divorce, when everything is changing and uncertain, it isn't hard for people to fall into some financial traps. It isn't uncommon to face money troubles.
If you're anticipating a divorce or are in the midst of one, here are seven financial situations to try to avoid.
- Wouldn't a new toy, like a car, help you feel better? It might -- but hold off. Without that second income in the household, you'll need to adjust your spending. Wait until you see what your budget will look like before splurging.
- Try not to cash in stocks or other investments to pay the bills. If you have other means to pay your bills, use them. You could owe significant taxes if you sell off an asset that has appreciated.
- The ex-spouse paying alimony no longer will be able to write off those payments if the divorce is finalized after Dec. 31. You won't have that extra money in your pocket. You'll be paying more in taxes instead.
- Don't pull money out of the 401(k) assets you receive in a divorce settlement. You can roll it over into your retirement account. Taking it as cash now could have tremendous tax implications.
- Stop fighting over the house and consider how your finances will be impacted. The house might have a lot of sentimental attachment, but it could be worth less than you think it is -- or even less than you owe on it. Will it need significant maintenance? Consider all the financial effects taking over the house could have.
- Don't quit your job to avoid paying alimony. In the long run, the lost paychecks will cost you more than the spousal support would have.
- Make a financial plan. You no longer have to share the checkbook or tell anyone how you spend your paycheck. However, you still have to answer to yourself, and it's easy to give in to financial impulses during a trying time such as divorce.
A divorce is a fresh start -- for you and for your financial habits. A Pennsylvania attorney experienced in divorce cases can make you aware of other financial pitfalls you could face.