Two Finance-Related Divorce Mistakes You Should Avoid

Getting divorced is never something a person thinks is going to happen when they get married. Unfortunately, divorces happen every day. If your marriage is no longer working and a divorce is the only way out of the problems, you have to accept the fact that you have an expensive process ahead of you. You can, however, save yourself a little money by avoiding these two costly financial mistakes.  

Mistake #1: Becoming a Victim of Debt

The biggest mistake any divorcing spouse can make is not knowing enough about the finances and debts they share with their spouse. For example, if your spouse has always been the one to balance the checkbook and keep up with the bills, you may have no idea how much you owe and how much you have. This, unfortunately, gives your spouse a clear advantage when it comes to settling financial issues.

If you are planning on getting a divorce, you need to collect information regarding your finances. This includes bank statements, account numbers, and any other financial information you share with your spouse.

You also need to make sure you separate and/or close any accounts the two of you share together. It is extremely common for spouses to get a credit card and get a secondary card for his/her spouse. While the account is in your name, your spouse could use the secondary card to go on a shopping spree and put you in debt. Do not waste time calling to make necessary adjustments to prevent this from happening.

Mistake #2: Not Considering Taxes

If you will be paying child support, you are not going to be able to write that off on your taxes. Furthermore, the child support is tax-free income for your ex. Spousal support, however, is something you can write off on your taxes, meaning your ex will have to pay taxes on the support. Furthermore, only one parent will be able to claim the child on their taxes. This can hugely impact the amount of your taxes you will pay because this can affect your eligibility for credits such as the earned income tax credit (EITC) and the child tax credit. It is important to make sure you consider all of this information.

More importantly, you need to discuss this with your spouse. Typically, the primary caregiver claims the child on their taxes. If custody is split pretty evenly, you may try discussing having one parent claim the child and split the money received from the child tax credit with the other parent. A second option would be to agree to spend the money on something for the child.

For more information about divorce law, consult a firm such as Kalamarides & Lambert