3 tips for making smart financial investments during divorce

On Behalf of | Jan 13, 2023 | Divorce

Divorce often comes with significant financial setbacks. You lose property and home equity, as well as retirement savings when you split your assets with your spouse. You will also likely find that your standard of living may shift slightly because it costs more to maintain two separate households on the same income than it did to maintain a shared household.

However, with careful planning, you can minimize how much effect your divorce has on your future financial stability. Making smart investments during the divorce process will be key to ensuring your stability later.

What kind of investment tips can help those preparing for divorce?

1. Don’t let emotions guide your housing decisions

From whether or not you seek possession of your marital home in the divorce to whether you rent or buy after moving out, the choices that you make about where you live now and in the first few months after the divorce can influence your financial situation for years to come.

Rather than rushing to buy the first thing that comes on the market in your price range, it may be smarter to give yourself an opportunity to heal and recover. Looking for affordable or short-term rental housing solutions can often be better than making the commitment to buy right away during a divorce. For some people, moving in with family or friends can help them put aside the money they will need to purchase a home on their own after the divorce.

2. Be smart about your retirement accounts

There are many ways to handle the division of retirement accounts and pension benefits in your divorce proceedings. You could divide the accounts, or you can use what they are worth to guide certain other financial choices. If you do divide the actual accounts, using the qualified domestic relations order can help eliminate the risk of penalties and taxes diminishing your savings.

3. Avoid cashing out too soon

Sometimes, when you file for divorce just won’t be the right time to sell an asset. Whether the market for real estate in your neighborhood is low because of a recent high-profile crime in the area or the stock that you have invested in during the marriage is currently trending lower than what you paid, sometimes you and your spouse may have to reach an agreement that certain assets aren’t ready to sell.

It is possible for the two of you to reach a fair settlement agreement without necessarily selling assets at a loss. As you do start to separate your financial resources, it is also important to remember that you may not want to commit them to any long-term investments right away, as your life may change significantly in the next few years.

Making the right choices with your current and future resources during a high-asset divorce will help you limit the financial setbacks the process causes for you.