Breaking up is not only hard to do, it can be brutal on your finances.
Legal fees and creating two households from one are just the initial costs of separation. And while some expenditures are necessary, others can be emotionally charged and careless and can lead to serious debt.
Here are seven common ways divorced couples can get into big financial trouble after a split:
1. Ignorance. While a divorce decree may specify who is to pay what account, it carries little weight with lenders.
"The most frequent mistake of all after divorce is assuming that because the ex has been the one ordered to pay back the debt in the divorce, they are off the hook for it," says Lisa Decker, an Atlanta-based certified divorce financial analyst. "Most people do not understand that courts do not have the authority to make creditors abide by a judge's orders in adivorce." If possible, delete jointly held debts before leaving, then close all co-signed accounts.
2. Delusion. If you relied on the other person's income during the marriage, your cash flow may take a hit. As it constricts, so must your budget. Unfortunately, many who are accustomed to abundance deny reality and continue to shop as before. The bills, however, wind up on the cards.
Blindly carrying on is not necessarily selfish, says Livonia, Mich., divorce financial adviser Carrie Cole, particularly when children are involved. The motivation stems from hoping to preserve their kids' standard of living. "The No.1 thing most parents want is for a child's lifestyle to continue," says Cole, explaining that they pay for such luxuries as "private schools, riding lessons and skating lessons when there is clearly not enough money to go around." Resist; be conscious of your current circumstances and spend accordingly.
3. Neglect. Own a home together? Credit problems will erupt if you don't bother to determine the property's real worth before assuming the other person's share or completing the proper paperwork.
Sheryl Petrashek, an Apple Valley, Minn.,real estate agent, has seen many cases where one party was awarded the rights to the home, but neglected to remove the other person's name from the note. Then,"when the spouse who is supposed to pay the mortgage quits paying, it ruins thecredit of the other spouse, too," says Petrashek. She believes most divorcing couples would be better off selling real property, then dividing the proceeds equitably. And if you stay put? Update all ownership documents immediately.
4.Revenge. Wanting to ruin your ex by charging up the cards is a frequent response to betrayal, says Todd Huettner, president of Huettner Financial, a Denver consulting firm specializing in divorce finance. "It is what I call 'the saboteur spouse,'" he says. Squelch this desire, though. While big balances may result in the hoped-for fury, you too could be held responsible for the balance.
Plus, it's not just the saboteur who makes shortsighted financial choices during and after a breakup, but also the one who fears revenge debt. "They rush out and close a bunch of accounts and open new ones," says Huettner. "This is often the last thing you want to do. It can really lower your credit score, which limits other options."
5. Beauty. If you've been dumped for a younger model and want to make yourself feel better by looking better with the hope of attracting a new mate, you may be considering splurging on a beautification procedure.
Be careful, though. Cole says she's familiar with this reaction, and it usually translates into little more than added liabilities. She cites a client who spent about $20,000 on plastic surgery after discovering her husband's affair. "It was money that she clearly could not afford to spend; however, it was more important to her than paying off credit cards," says Cole. Worse, those nips and tucks had no positive impact on her soon-to-be ex. Delay any major decisions -- financial and cosmetic -- for at least six months to a year after a divorce is finalized.
6. Competition. What happens when one parent can afford more and better things for the children post-separation? The less wealthy partner sometimes attempts to keep up with or even outdo the other.
"Oftentimes, there is a pre-divorce battle for the children's love and affection by purchasing gifts for kids or taking them to concerts or cruises in order to gain their affection over the other spouse," says Alan Ross Frisher, a certified divorce financial analyst from Melbourne, Fla.. Question your motivation for purchasing certain items for the kids. If it's to prove your love, stash the cards.
7. New love. Getting sucked into a fresh romance when a marriage falls apart can be seductive. It can also be pricey.
Noah B. Rosenfarb, a certified public accountant in Short Hills, N.J., says one of the most common post-divorce credit issues for his female clients are loans they make to new boyfriends. "In some cases, it may be a thousand dollars to fix their broken car, but in others,it is tens of thousands to help them with their business, or hundreds of thousands to put towards an 'investment' that was really a scam," says Rosenfarb. His advice: Avoid lending or giving money to anyone for at least a year after divorce.
Almost everyone has regrets about a broken relationship. Don't make needless, emotion-based liabilities one of them. Divorce your mate, not common sense.
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