Many people get caught up in the emotional side of a relationship breakdown, which can cause them to make serious financial mistakes and damage their financial situation for both the short and long term.
See what financial mistakes you should try to avoid:
Forget to make repayments
This is a mistake that can cause problems for you down the track. It is important that throughout the process, regular repayments are being made on all debt, but particularly on jointly owned debt. Some people wrongly assume that debts are in effect frozen until all the financial negotiations are complete and then will be either taken over by one partner, the asset sold and the debt paid out from the proceeds. Even if this occurs, if you don’t keep up with repayments in the interim, not meeting repayments could result in a default on your credit report on any jointly owned debt. If one party is making all the repayments, keep a track of it and give this information to your legal adviser to factor in.
Keeping a clean credit report is vitally important when you are ready to move on and look to take out a loan in your own name. When a lender looks at your report, they will not see a divorce as an acceptable excuse for not meeting repayments.
Our Lending Specialists are able to help you explore your lending options. Whether you are trying to work out if you could take over the home loan yourself, need to draw equity to payout a partner or seeing what you are able to borrow on your own when you are ready to find your own place. Just call 13 72 62 or email email@example.com.
Not considering long term financial security
Even though you may want to finalise the divorce as soon as possible, if you only focus on the immediate task of splitting assets and finances without considering the long term consequences, you are not doing yourself any favours.
For example, you may think that taking assets such as cars, boats, caravans or furniture may be a good idea at the time, but these items often decrease in value over time. Whereas assets such as property or shares usually increase in value. Thinking short term could mean that you may miss out on opportunities that could improve your long term financial security.
Before signing any proposed settlement agreement, have a financial planner look over the agreement and advise you on any long term financial consequences.
Being unrealistic about investment returns
It is important to be cautious when splitting assets and investments. You need to consider the investment’s potential growth over the next few decades and it’s best to do this by getting a professional’s opinion. Even if a certain investment (for example, a property) has seen steady growth over the past few years, it doesn’t necessarily mean it will continue to grow at a steady pace. Think twice before accepting investments that you may not have as much knowledge about over safer asset options (such as cash).
No matter what terms you are on with your partner, it is best to seek legal and financial advice before signing any settlement agreements. This way you can get a professional opinion without emotions getting involved.