By John Grace
Contributing Columnist
Divorce is one of the most emotionally charged financial events of a lifetime, which is exactly why people make bad decisions.
After more than four decades guiding individuals through major life and money transitions, I’ve watched the same mistakes repeat themselves with painful consistency. Different couples. Same regrets.
Here are the seven most common divorce mistakes, and how to avoid them:
• Letting emotions drive financial decisions. Anger, fear and guilt are terrible financial advisors. Decisions made to “win” the divorce often lead to losing long-term stability. The court may care about fairness — but your future cash flow doesn’t care about your feelings.
• Fighting over assets instead of outcomes. People fixate on what they get instead of what it costs to keep. The house is the classic example: mortgage, taxes, maintenance, and illiquidity quickly turn a “win” into a burden. Focus on results, not bragging rights.
• Underestimating future cash flow needs. Many divorce settlements work only on spreadsheets. Real life includes inflation, health care, longevity, and surprises. If your plan doesn’t stress-test future income needs, it’s not a plan — it’s a hope.
• Mishandling retirement accounts. A dollar is not a dollar. Retirement assets come with taxes, penalties, and timing issues. Dividing accounts without understanding this can quietly gut your future lifestyle.
• Ignoring taxes until after the divorce. Taxes don’t argue in court, but they absolutely show up later. Capital gains, support taxation, filing status and asset liquidation all matter. Miss this, and you’ll pay for it for years.
• Trying to “save money” by skipping professional guidance. Cutting out advisors to save fees often leads to far bigger mistakes. The right professionals prevent errors, reduce conflict and help you see risks you didn’t know existed.
• Failing to protect support, insurance and estate details. This is a big one. Divorce does not automatically update beneficiaries, estate plans or insurance coverage. Worse, many support agreements ignore a critical question: What happens if the payor dies? If spousal support disappears because the payor “went to heaven,” the recipient can be left financially stranded. Life insurance is often the only backstop — and it must be properly structured, owned and enforced. Miss this step and the consequences can be permanent.
The bottom line is that divorce isn’t about winning the settlement; it’s about surviving and thriving afterward.
Avoid these seven mistakes, and you dramatically improve your odds of financial stability. Tell it like it is: smart decisions today protect decades of life tomorrow.
John Grace is a registered representative with LPL Financial. His On the Money column runs monthly in The Wave. The opinions expressed here are for general information only and are not intended to provide specific advice or recommendations for any individual.
LIFTOUT
Decisions made to “win” the divorce often lead to losing long-term stability.
