Avoiding Financial Mistakes During Your Divorce
This is the second in a series of posts on dealing with the business aspects of your divorce. This material is adapted from the award-winning book by Ed Sherman, “Make any Divorce Better.” Ed Sherman is one of the founders of Divorce Helpline. His dedication to providing compassionate and cost-effective personalized legal support to those facing divorce resulted in the unique service model that distinguishes Divorce Helpline from other California divorce attorneys and divorce document services.
Over and over again, people make the same mistakes and lose serious money that could have been saved.
Ignorance is the most common trap in the business of divorce. Because your life is upside down, you may not want to deal with tedious financial details, but if you don’t take the trouble to understand what’s going on financially, and what you are entitled to, you might as well hang a big “victim” sign around your neck.
Ignorance increases your own sense of helplessness and leaves you vulnerable to the risk of being manipulated. You are also at risk of getting bad advice and a bad deal. You can seek advice and assistance from professionals, but you should never rely on anyone but yourself to take care of your business for you. Be sure to make the effort to organize and understand the business part of your life.
Bad judgment is a real hazard when emotions are running high. Insecurity makes you doubt your own thinking and ability. Fear and anger make you grasp for too much or surrender too much.
Of course you should get what you are entitled to, but to demand more for emotional reasons is inviting a ruinous conflict that might leave you with less in the end. And giving up what you have a right to can leave you with a future full of regret if not hardship. So be careful and take precautions against your own emotionally affected judgment:
• Understand the emotional cycles that both you and your spouse are going through. Keep in mind that at any given time, emotions can strongly affect your judgment and decision-making ability.
• Keep business and emotional matters separate.
• Don’t jump to sudden conclusions or make impulsive agreements or decisions. Above all, unless you face a desperate emergency that can’t wait, don’t rush off to a lawyer until you have some information and get yourself prepared.
• Don’t sign anything you haven’t thought about or don’t understand.
• Use structured problem solving. Keep a journal and make entries in it regularly about your thoughts and feelings. Keep track of your evolving priorities, possible solutions to problems, and your goals. Review your journal regularly, especially before making any final decisions.
• Use the law as a guide. You are not required to follow the legal standards, but they have been worked out over millions of cases. If you are confused or in doubt about what you want to do, and if the laws are clear and predictable, use them as a guide.
• Seek advice from reliable, informed, experienced people.
Excessive spending is very common before, during and after a separation. Before breaking up, a couple may buy a new home or remodel their old one, buy a car, take a long vacation, have a baby — anything to bring them together in something. This is not usually consciously planned, it just works that way. During separation, spending is used as an anesthetic for emotional pain. After separation, the couple genuinely needs a lot of money to set up two separate households, added to which is neurotic spending driven by emotional upset.
Being aware of this trap may be of some help, but it is often difficult to see or control your own eccentricities. Control impulsive and compulsive buying the same way you would control neurotic eating habits. The best thing is to make yourself as open, centered and strong as possible. Deal directly with your emotional issues instead of reacting and running from them.
Money-hiding is not common but it is not rare, either. Sometimes, when it becomes clear that a divorce is coming, one spouse or the other will start putting money away in a private money stash. If this is done without cheating the community, it is actually a good idea because it gives that spouse a sense of security, independence and control. However, if marital assets that belong to both spouses are being secretly diverted into a separate account, this is a clear case of cheating.
In moderate amounts, it may not be worth fighting over, but it is something to watch out for, keep track of, and include in any future accounting. In extreme cases, you will want an attorney to take emergency measures to protect the marital estate and your interest in it.
Sometimes, the money manager will spend joint savings or take out a loan for living expenses while putting regular income into a separate account. A family business can be manipulated or run into the ground so income appears low later. Or bonuses and commissions can be postponed until after separation. The list is almost endless.
If a divorce is coming, take a careful look at plans to refinance your house or other kind of loan. Watch where income goes and watch your savings account withdrawals. After separation, take a close look at financial transactions during the previous year.
If you have questions about any aspect of your divorce process, please give us a call at 1-800-359-7004. We’re here to help.