Financial mistakes to avoid during a divorce

With more than 50% of marriages ending in divorce, I’m sure everyone knows at least one person who’s gone through the process and, likely, had more negative experiences than positive ones. Divorce can be one of the most stressful and emotional times someone can go through, so it’s crucial to make sure you don’t let your feelings impact important financial decisions that you can’t turn back from. Here are five of the most common mistakes that I’ve seen.

Don’t let emotions decide for you
It’s very important for both individuals to go through all the emotional stages before making any final decisions. If an agreement is signed before both parties are emotionally ready, there may be regrets later on that can lead to unnecessary future litigation.

Make sure financial information is up to date
Accurate information ensures the process is as smooth as possible and avoids you having to re-hash numbers. Make sure all statements are recent and that all assets are honestly disclosed, including debt balances. An older statement “found” by one spouse may falsely show money that is no longer there. Not necessarily because the other spouse is being dishonest about it, but more likely because it was money spent by both on cars, vacations, children, etc.

Don’t forget about taxes
When agreeing to the division of assets and who gets what, be aware of the tax implications on the different accounts and investments. A $100,000 bank account is not the equivalent of a $100,000 stock portfolio or RSP account after taking into account future tax liabilities. When equalization is done, it should take into account both immediate and contingent tax liabilities for both parties.

Don’t underestimate the importance of an accurate budget
Why does BUDGET sound like a six-letter curse word? Because nobody likes to put one together! But this is a vital component to ensuring both parties walk away with an agreement that is manageable and meets their needs. Budgets need to realistically reflect your lifestyle and include future expenses. A budget is equally as important for the spouse paying support, otherwise they might find they can’t actually afford the settlement that was agreed upon.

And the most common financial mistake made during a divorce …

Thinking short-term instead of securing your financial future
Let’s face it, even under normal circumstances people tend to satisfy their current wants or needs and put very little thought into planning and saving for the future. So when going through a divorce, it’s very easy to concentrate on your current needs and forget about the big picture. Sometimes, it just may not be possible to maintain your current lifestyle. You may need to make and accept a few adjustments today to ensure you are financially secure in the present, and future.

There are different ways to settle a divorce and, most of the time, it doesn’t have to mean a battle in the courts. You can instead choose to work through things peacefully together. Lawyers are there to provide legal advice but it can also be invaluable to seek other professionals for emotional support and financial advice, such as a Certified Financial Planner. Having an unbiased perspective can help you avoid some of these common mistakes, so you can hang onto your finances – and peace of mind.


Marie Machado, Vice President & Financial Consultant
Chartered Financial Divorce Specialist
T.E. Wealth, Oakville

This article was published in T.E. Wealth’s Strategies newsletter, June 2019 edition. Read the full edition here.

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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

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