January can be an opportunity for a fresh start. And for some, that means ending unhappy marriages.
In fact, January is known as "divorce season," the top month for divorce filings.
For some, the change will be welcome, while for others it will come as a shock when they learn their spouse is leaving.
If you have decided to file for divorce, or you were on the receiving end of divorce papers, divorce attorney Rebecca Zung, author of "Breaking Free: A Step-by-Step Divorce Guide for Achieving Emotional, Physical and Spiritual Freedom," warns about six common pitfalls you'll want to avoid.
1. Starting out in the dark
Do you know how much you and your soon-to-be ex have in savings and retirement funds? Are you aware of all the debts?
If you've let your spouse handle the finances, those details may be a mystery.
Conversely, if you have been the "money person," your spouse may think you have more money than you do, or may not be aware of the expenses and debts that take a big chunk out of your income each month. Either way, keeping one person in the dark about financial matters can be costly.
Zung recalls one client who nursed her husband — a "successful businessman"— back to health after a serious illness. He then revealed he had several million dollars in foreign bank accounts and "the IRS was on his tail, as he had 'forgotten' to mention the income on those assets to them all these years."
He had dragged his wife into the mess because they had filed joint tax returns for years. Even worse, he proceeded to hire top-notch attorneys for himself, leaving her on her own.
2. Winging it
Getting divorced costs money. "Not being prepared by having enough money to live on and pay fees until the temporary relief hearing when divorce starts" is a big mistake, says Zung. At a minimum, you'll need enough money to hire an attorney and pay certain filing costs, as well as to cover living expenses.
A lack of savings may force you to turn to credit cards or other loans, which will in turn mean starting your new life trying to get out of debt. (Similarly, if your spouse is leaving you, it is helpful to have access to funds you can control to pay for necessary expenses that come up while you split up.)
3. Paying an 'emotional tax'
Clients who give into a settlement for emotional reasons, or don't give in because they want their ex "to pay," usually regret it, Zung observes. It can be extremely hard to make rational decisions during this process, especially if you feel blindsided or taken advantage of.
But that's where a good attorney and/or therapist can be helpful. They can help you separate the emotional issues from financial ones, and make better long-term decisions.
4. Overspending on a new flame
Zung says she sees this mistake more frequently with men than with women. They spend money on the new love of their life, "too much, too quickly." Not only can this be expensive, but it can also work against their interests in the divorce process. "Even in no-fault states, it can be used against them if they spend more on a new girlfriend than on their wife and kids," she warns.
5. Using the children as leverage
In the Jim Carrey movie "Liar, Liar," he plays an attorney with a gold-digging client who fights for custody of her children — whom she calls "brats"— in order to get a bigger payout from her spouse. But, unfortunately, that scenario isn't just limited to Hollywood movies.
Zung says she's seen individuals "asking for more timesharing just to lower child support" or vice versa. While it's important to work out an agreement that works for you both time-wise and financially, children should not be used as leverage.
6. Not having your own accounts
You should have your own bank account and at least one credit card account in your own name. If you only have joint accounts, you may want to apply for your own credit card, even if that means starting with a secured card.
While there are a number of steps Zung recommends individuals who are splitting up take to protect their finances, one of your first jobs is to "become a sleuth and gain as much information as you possibly can." She explained in an email:
Find out in whose name all assets are titled. Find out what assets are in your spouse's own name. Identify all debts you and/or your spouse have, including outstanding mortgages for any real estate you and/or your spouse hold, and whose names they're in. Review your credit report to confirm it accurately reflects your liabilities. Copy (or photograph with a smartphone) every shred of financial information you can find.
You can get your credit reports for free once a year — but you can't check your spouse's without their knowledge — so it's not a bad idea to try to persuade your spouse to go over both your credit reports before you split up if that's possible. You can also get a free credit report summary on Credit.com, which includes two free credit scores updated monthly, at Credit.com.
Check both carefully. Your credit report should include all your open accounts, including joint accounts you may have forgotten about (and ideally, should close). And a drop in your scores could be a sign that your spouse is running up balances on joint accounts, or failing to pay joint accounts he or she promised to pay.
More from Credit.com
- 5 Tips for Managing Your Credit Through a Divorce
- What Happens to Your Credit When You Get Divorced?
- Credit Card Options for Couples