At MPPL Financial, we help clients during the divorce process. Terri Rau, a financial advisor and a Certified Divorce Financial Analyst® on our team, has seen firsthand how emotionally overwhelming and mentally draining this time can be. “Many describe the divorce process as a time of feeling frozen, numb, or like they’re moving in slow motion,” says Rau.
If you’re contemplating or currently navigating a divorce, it is essential to gain a clear understanding of your finances. A well-informed financial perspective ensures that your settlement is both fair and sustainable. Even those who feel well-prepared can make critical financial missteps that may have lasting consequences.
Ways To Avoid Common Money Mistakes in Divorce
Here are some of the most frequent financial mistakes in divorce that Terri Rau and the MPPL Financial team encounters, along with practical action steps to help you protect your future:
- Underestimating post-divorce expenses. As part of the divorce process, you’ll need to submit a financial affidavit reflecting your anticipated post-divorce expenses. This document plays a pivotal role in determining whether spousal support is appropriate.
It’s crucial to be realistic and thorough. Overlooking costs like health care deductibles, children’s expenses, or anticipated home repairs can significantly skew your financial outlook. A miscalculation of even $500–$1,000 per month could leave you with a gap of $6,000–$12,000 annually. This oversight can be equally problematic whether you’re the supported spouse or the primary earner. A budget that is too lean may leave you without adequate support—or agreeing to payments that are financially unmanageable.
Recommended action step: Consider retaining a Certified Divorce Financial Analyst (CDFA). A CDFA is trained to help you build an accurate post-divorce budget, develop your financial affidavit, and uncover expenses you might otherwise miss. Their expertise ensures your financial disclosures are complete and reliable.
- Assuming your attorney will handle all of the divorce details. “Divorce attorneys are indispensable legal advocates. Their deep understanding of the law is critical to protecting your legal rights. However, financial strategy is a separate specialty. Just as you wouldn’t ask your doctor to repair your car, it’s not realistic—or fair—to expect attorneys to serve as financial experts”, says Rau.
Attorneys often rely on the information you provide in your affidavit and trust that it’s accurate. While many will review your numbers for consistency, detailed financial analysis is beyond the scope of most legal practices.
Pensions are among the most commonly improperly assets we see at MPPL Financial. What’s more, sometimes, the pension is the most valuable asset in a marriage. Attorneys often use a present value statement from a pension plan to determine the value to include as marital property. This method does not take into account what portion of the pension is marital property and/or separate property.
Recommended action step: While working alongside your attorney, retain a CDFA to conduct a proper valuation of pensions and other complex assets. A CDFA can provide critical insight that supports your legal case and ensures an equitable financial outcome.
- Letting attorneys do the talking for you during the divorce process. The more decisions you and your spouse can work out by just communicating, the more money you’ll save. Sometimes couples cannot bear to be in the same room with each other.
“We try to encourage these couples to consider the cost of relying solely on attorneys to communicate their goals,” says Rau. “Why? This communication style can come with a high financial cost. When each message passes through two legal professionals, the billing hours add up quickly –often $500-$600 per hour or more. While attorneys play a vital role in your process, there are times when neutral, structured communication can resolve financial matters more efficiently.”
Recommended action step: Consider working with a CDFA® as a financial neutral to help you both work together to resolve the various aspects of your divorce and act as the source to provide agreed upon settlements to your attorney.
- Letting your emotions make your decisions. So many people going through divorce just want to “get it over with”. However, this isn’t the time to throw your hands up and agree to a settlement just to be done with it. What feels like relief today may become regret tomorrow—especially if you accept terms that compromise your future stability.
“In our experience, a 50/50 split isn’t always the fairest or most functional solution. Financial settlements should reflect more than a simplistic division—they should consider taxes, future expenses, and sustainability for both parties”, says Rau.
Recommended action step: Take a deep breath. Put the emotions aside so that you can consider the impact of these decisions over the long haul. Making changes after the fact will not be easy and almost certainly costly. Try to work with your spouse and your professionals to arrive on a settlement to provide the best possible outcome, now and in the future, for both of you. Be sure to hire the right professionals to be by your side and provide the help you will need throughout this volatile time in your life.
Pulling It All Together
Divorce is a time of high emotion, combined with significant financial stakes. If you are contemplating, or going through the divorce process, we encourage you to contact us to discuss your situation in further detail. MPPL Financial has an experienced CDFA on our team to work closely with you during this highly sensitive time in your life.