divorce360.com | Divorcing? 15 Costly Financial Mistakes (page 3)

10. Beware of Settlements that Look Good.
Both spouses and children must make compromises in their life styles post divorce. A settlement that does not give one spouse enough money to live on is likely to go into default in the future. Be fair, but verify the numbers. Get payments up front whenever possible even if you get less in total. Secure all payments with assets and insurance.

11. Disregarding the Impact of Inflation.
The effects of inflation on the cost of a child's college education 15 years in the future or retirement 20 years hence, can be dramatic. The rule of 72 is a simple way to judge the impact of inflation. If the inflation rate is 3 percent, the rule of 72 states that prices will double in 24 years (72/3=24). College costs at 5 percent inflation will double in 14.5 years (72/5=14.5).

12. Not Waiting until Eligible for Husband's Social Security.
If a couple is married for 10 years or longer, a wife is entitled to receive half of her husband's social security at retirement. Her ex-husband's social security payments are unaffected. It's ironic that the average length of marriage for people who get divorced is 9.6 years. Waiting just 6 months longer will increase a wife's retirement options with no reduction in her husband's payments.

13. Forgetting to Update Estate Documents.
After heavily contested divorces, many people forget to change the beneficiaries on their life insurance policies, IRA's and Will. The result is that their ex-spouse ends up inheriting their estate which they really wanted to leave to their children, new partner or favorite charity.

14. Failure to adequately insure the divorce settlement.
Premature death or disability of your ex-spouse can result in loss of maintenance, child support, college tuition or property settlement. Life and disability insurance can guarantee your payments and your family's security. Also, don't ignore the high cost of purchasing individual health insurance.

15. Failure to Develop a Financial Plan.
One indisputable fact of divorce is that two households cost more to operate than one, but income is unchanged. Many people start their post-divorce lives not fully understanding that their settlement must last a significant amount of time...perhaps the rest of their lives. Financial planning can help people transition from married to single lifestyle by prioritizing financial goals, developing realistic expectations and producing written plans for allocation of financial resources.

Lee Slater is a Certified Financial Planning Practitioner ™ (CFP) and is licensed as a Certified Divorce Financial Analyst (formally Certified Divorce Planner, CDP). He can be reached at leeslater@sprintmail.com. His Web site is http://www.divorce-money.com/.

Divorcing? 15 Costly Financial Mistakes

Settlements: 15 Critical Financial Mistakes Often Made in the Heat of Divorce

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