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Avoid these financial mistakes after divorce

Divorce is clearly a life-changing event for all concerned, but people have different ways to cope with the stress. Unfortunately, too many newly single Arizonans make impulsive or poorly thought-out decisions that can have negative consequences for years to come. Many of these ill-advised choices come in dealing with finances, an area that is particularly vulnerable due to the fact that two households must now be established where one stood previously.

Personal finance experts warn primarily against acting as if one is entitled to something because of the divorce. There is no entitlement to spend a lot of money to celebrate newly earned freedom, nor is spending the same way as during the marriage guaranteed. This includes whether to keep the family home or not. A realistic appraisal of a budget, resources and the ability to earn money must be made.

In making the initial budget decisions, the temptation to cash in or tap into retirement funds should be thought of as a very last resort. A new beginning lends itself to thinking that anything is possible, but being honest about age, circumstance and how hard it actually is to save money is the better approach. Also, it is imperative to consider the tax consequences of divorce. Tapping into a 401(k) can incur penalties as well as taxes, and alimony or spousal support paid for divorces finalized after 2018 will no longer be tax deductible.

The end of a marriage involves many issues other than property division. A family law attorney may help clients navigate the divorce legal issues in an effort to reach a reasonable settlement for all involved.

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