Did you know that 1 in 5 women wind up in poverty as a result of divorce? Wow! Right?

Why is that? Well, it is expensive, both emotionally and financially. I know during my own divorce, I felt overwhelmed and alone. There were days when I could barely get out of bed, let alone make effective decisions for my financial future.

So, what is poverty anyway? If you look up the definition, it is the “state of being extremely poor”. In 2021, the poverty level for a household of two has an annual income of less than $17,420. This means that 20% of women with one child have an income of less than $17,420 after divorce. How does this happen?

Let’s look at the 5 biggest financial mistakes women make in divorce to learn more.

1. Not understanding current nest egg 

One spouse usually manages the finances for the family. They handle the investment opportunities, pay the bills, and balance the checking and savings accounts. They know what they owe and what they own. The other spouse may not be familiar with this information. Too often, it is the woman who do not have a good handle on the family financials. Take time to gather your statements, run your credit reports and organize your financial picture prior to a divorce.

2. Emotional attachment to the marital home

The decision to stay or leave the home you raised your family in is difficult. It may be your place of refuge during this difficult time, or you may feel moving will disrupt your children. Homeownership is very expensive. It is not just about paying the mortgage, but also the ability to maintain the home and conduct major and minor repairs. These costs add up quickly! Review the last 5 years of home expenses, discover your home’s value and then determine if you can afford the home. Keeping the family home may not be practical or realistic!

3. Over-looking the long-term consequences 

Every decision comes with a tax bill, and the capital gains can be killer! Just like the ocean, calm and beautiful on the surface, this is the case with most assets. They may look “equal”, but there could be danger lurking underneath. This threat could be disguised as taxes, capital gains, inflation or even investment losses. Some retirement accounts may also impose a penalty if you take a distribution before a specific age.

4. Evaluating retirement plans incorrectly

Many times, retirement plans are the largest asset in the marital property bucket. There are so many different forms of retirement plans – some are true pension plans, others are qualified and others are not. Employers can also contribute, so knowing if the employee is fully vested is important. Correctly calculating each of these plans and evaluating the value is crucial when determining the settlement.

5. Failure to create a new budget

With divorce comes new lifestyles and finances to manage. With your available income, you may need to identify some trade-offs required stay within your parameters. Be prepared to cut some bills and decide what is necessary. A plan can help you figure out ways to cover your bills, save for emergencies and plan for your future. Creating a budget that you review and adjust often will ensure you reach all your goals!

Hire a Certified Divorce Financial Analyst® to avoid these common mistakes. Together, you can make sure YOU are NOT 1 of the women who end up in poverty as a result of divorce!

Shell Sawyer, CDFA®, CDC® is the Founder & CEO of Finding Strength with Shell LLC. Her passion is to help women by providing financial counsel and guidance through the maze of divorce.

Original Article: https://findingstrengthwithshell.com/blog/f/5-biggest-financial-mistakes-women-make-during-divorce