Women and Divorce: How to Avoid 4 Common Financial Mistakes

Going through a divorce is difficult for everyone involved — but women typically feel the financial repercussions more deeply than men. According to research by the U.S. Government Accountability Office, women over 50 who divorce or separate see their household income fall on average by 41 percent, versus 23 percent for men. And while the overall divorce rate has fallen over the last decade, it has doubled among couples over 50 since the 1990s.

Navigating a divorce is far from easy but knowing some common mistakes to avoid can help you plan better financially for your new life post-marriage.

Common financial mistakes to avoid during a divorce

Not being plugged into your family finances

When one spouse controls the finances in a relationship, it leaves the other at a disadvantage during a divorce — and far too often, women are the ones who find themselves in the dark when it comes to all the financial details.

“You need to know where the money is,” says Jenny Raess, CFP®, Advice Integration Lead at Northwestern Mutual. “Is the money in your name, in your spouse’s name or do you have joint accounts? Not having that understanding up front can keep the settlement from going as you hope and increase the likelihood of getting taken advantage of.”

Before starting the divorce process, Raess suggests gathering copies of all financial statements and tax returns and determining how different assets and accounts are titled. Enlisting a trusted person to help you go through file cabinets or digital accounts can make the process less overwhelming.

Not calculating a post-divorce budget

According to Dustin S. McCrary, a divorce attorney based in Statesville, North Carolina, one of the biggest mistakes he sees is underestimating how difficult it can be to adjust to a change in income.

“Judges often refer to this as ‘tightening your belt,’ and that's really what has to happen,” he says. “You have to be mindful of every dollar that comes in and every dollar that comes out.” That’s why McCrary suggests talking to a financial advisor to prepare for post-divorce life.

“The same way an attorney helps you through the legal problems and a therapist helps through the emotional issues, a financial advisor can help navigate the path to financial success,” he says. “Divorce doesn't have to mean the end of the world financially. It might just mean you have to re-shape that world.”

Raess suggests trying to build an emergency fund prior to filing for divorce that would cover six months’ worth of expenses — based on your post-divorce budget — and that also includes projected attorney fees. “Having a separate savings account in your own name that’s liquid is really important,” she says.

Holding onto assets that could hurt your finances

During a divorce it’s easy to get hung up on trying to keep certain assets, but you need to assess whether it makes sense for you financially in the long run. For instance, Raess explains that many people don’t take taxes into account when trying to figure out how to divide assets.

“Accounting for the tax differences in the assets as things get split is really important and can get overlooked,” Raess says. “A million-dollar house and a million-dollar retirement plan are not equal when you take taxes into account.”

Another consideration: Can you actually afford the assets that you’re trying to keep based on what your new income and budget will be after the divorce? For instance, you may want to hold onto a house for emotional reasons, but if the mortgage or the cost to maintain it will be putting a strain on your future finances, it may not be smart to keep it.

Letting emotions dictate all your decisions

It can be hard to think logically during a divorce but allowing your feelings to guide your actions could force you into a wrong financial move.

“It’s emotional to get divorced and it’s normal to be afraid — especially if you don’t understand your finances,” Raess says. “And it’s easy to also just want to get the process over with by saying, ‘Let’s just settle.’ But that can be a big mistake.”

On the flip side, don’t let your emotions tempt you into an unnecessarily drawn-out divorce, either. “Be mindful that prolonged court battles over assets only diminishes what you are actually recovering,” says McCrary, who has seen clients pay as much in legal fees as they’ve been awarded in a settlement.

That's why it's important to work with your attorney and financial and tax advisors before you make any major decisions. They can help look at the entire picture and weigh how certain decisions will impact your finances, both now and in the future.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.