Once the decision to divorce has been made, parties often start to wonder how they will fare financially. After all, money is one of the most common reasons for contention in divorce. Contention is not the only issue that may impact a divorce settlement though. In fact, there are many potential pitfalls that can have a financial impact on one or both divorcing parties. Learn what they are and how you can avoid them by examining the following financial mistakes commonly made in a divorce.
Underestimating the Potential Impact
Divorce is a lot like a business transaction, and like all business transactions, it is inherently complex. Factors that determine the division of debts and assets are applied differently from one case to the next, based on the couple's particular situation, and that can leave one party at risk for a significant financial depletion. In fact, one study found that baby boomers, who are currently divorcing at an unprecedented rate, saw a 77 percent reduction in wealth after divorce. Add in the potential for asset depletion, asset hiding, and revengeful spending and it becomes clear just how crucial it is that one fully understands the financial risks and implications of divorce - so underestimate it at your own risk.