Common Financial Mistakes To Avoid During Separation

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Going through a divorce or separation is often an emotionally challenging situation, particularly as we start relationships with the intention of them lasting. It can be difficult when it doesn’t work out that way and the relationship ends, especially when it comes to working out who gets what. 

When these relationships end, many couples get so caught up with the emotional fallout that they end up forgetting about their finances. With that in mind, here are some of the most common financial mistakes you need to avoid during separation or divorce.

Not understanding your finances

Some people go through their divorce or separation without having a complete picture of their marital finances. If this sounds like you, that means your ex-partner may end up with an unfair advantage when it comes to your property settlement. 

So the first step towards a fair financial outcome for you both is to determine exactly where you both stand by accessing and carefully reviewing your joint and separate financial statements. 

This means checking absolutely everything, from your bank statements to your investments (equities, commodities, property, bitcoin, etc) and your superannuation amounts to your salary and other incomes. You also need to note down a complete list of all joint and separate debts, liabilities, and other outgoing expenses.

Not knowing you’re in a de facto relationship

Did you know that even if you don’t live in the same house together, it’s possible to still be in a de facto relationship? A relationship is defined as de facto under the Family Law Act of 1975 when two people who aren’t married or related are in a relationship together for 2 years or more without separation. 

This is a common financial mistake for many because they simply aren’t aware of how the law works. So if things do go bad between you and your ‘friend with benefits, they might have a legal right to some of your assets. This can actually be a legal grey area at times which is ultimately up to the judge.

Not continuing debt repayments

Even though you’re no longer going to be a couple, it’s important for you both to continue making all of the repayments on your debts throughout the separation process. Otherwise, this is one financial mistake that can cause problems with accessing credit in the future for both of you. 

When lenders view your credit report, it’s unlikely they will look at a divorce as an acceptable reason to not make debt repayments. So even if things between you and your ex-partner aren’t exactly harmonious after the breakup, make sure that all debts are paid. And don’t take their word for it either. Always check statements or call debtors to be certain.

Assuming you aren’t entitled to an asset

When it comes to dividing your assets after a breakup, you’re both entitled to everything. It doesn’t matter whether it’s in your name, their name, or both of your names together. All assets that have current or potential value must be included in the property pool pretty early in the discovery process.

If you can’t come to an agreement on how to divide your property during settlement, the decision is ultimately then left up to the judge. So if your ex is saying that certain assets are only theirs for whatever reason, even if it’s something they inherited in their name, they’re not correct at all. They can’t decide that you aren’t entitled to an asset. It’s simply not their call to make.

Going through the courts for no reason

Because things can sometimes get pretty ugly towards the end of a relationship, it’s easy to see why some people want to hold out on settling for spite. Or because they want their ex to pay for what they did. But this is an unnecessary risk that can end up costing you financially and emotionally. How? Well, the judge may see things differently than you expect. 

Instead of seeing how terrible your ex is, the judge might think you’re the problematic person in the equation. This may cause your ex to be awarded more than you because remember there’s no such thing as a guaranteed 50/50 split in a property settlement. Sometimes it’s best to settle fast, close the chapter, and start moving on with your new life.

Remember that the one thing you can’t get during property settlement is peace of mind. So you just need to be clear in what you want and discuss it with a family lawyer before signing anything.