10 Financial Missteps to Avoid During a Divorce

Divorce impacts every part of your life—especially your finances. And while the emotional side often takes center stage, the financial decisions you make during this time can have serious, lasting consequences.

In this blog, we’re breaking down 10 of the most common financial missteps people make during a divorce and how to avoid them. If you’re navigating a split, or thinking about one, this list could save you a lot of stress and money.

1. Underestimating Living Expenses Post-Divorce 
   
   After a divorce, bills don’t split themselves. Rent, groceries, insurance, internet—it all adds up fast. Many people assume they can keep the same lifestyle without running the numbers. That’s a mistake.
   You need a post-divorce budget that reflects your new reality. No guessing. No rounding down. List everything: rent or mortgage, utilities, car payments, child care, health insurance, and anything else that’s non-negotiable. Then factor in the unexpected, like sudden auto repairs or health expenses.
2. Failing to Understand the Long-Term Impact of Asset Division
   
   A house and a retirement account might look equal on paper, but they’re not. One ties up your money. The other grows it. One costs money to maintain. The other could fund your future.
   Too often, people fight to keep the house without thinking about long-term value. Or they agree to a settlement that looks “fair” without understanding how taxes or penalties will eat into it.
   You need to know what each asset is really worth—not just now, but ten or twenty years from now. That means factoring in taxes, growth potential, and how easy it is to access the money. This is where a financial advisor matters. They can help you run the numbers and avoid settling for less than what you actually need.
3. Overlooking Tax Implications
   
   It’s important to be aware that after divorce, your filing status, tax brackets, and deductions all shift. In certain situations, you could even lose credits you counted on, like the child tax credit. Sell the house? You might owe capital gains tax. Split a retirement account the wrong way? You could trigger penalties and a big tax bill.
   Too many people don’t think about this until tax season—and by then, it’s too late. You need a plan. One that accounts for your new filing status, income, and assets.
4. Keeping the House Without Considering Affordability
   
   Hanging on to the house feels like stability—but it can turn into a financial sinkhole. Between the mortgage, property taxes, maintenance, repairs, and insurance, costs can add up fast. You’re not just keeping a roof over your head. You’re taking on every cost that used to be shared.
   People often fight to keep the home out of emotion, not logic. They don’t run the numbers. They assume they’ll “figure it out later.” That’s risky. Ask yourself: Can I truly afford this long-term? Or am I holding on for the wrong reasons?
   A clean break might make more financial sense. Run the math with a professional before you make the house part of your new life.
5. Ignoring Retirement Accounts and Benefits
   
   Retirement accounts are not simple checking accounts—you can’t just split them and walk away. To divide things like 401(k)s or pensions, you often need a QDRO (Qualified Domestic Relations Order). Miss that step, and you could trigger early withdrawal penalties, extra taxes as mentioned, or delays in access. People sometimes take a cash payout thinking it’ll help them “start over.” But that move can wreck your long-term financial health. These accounts are meant to support you later in life, and gutting them now can create a gap you may never fully recover from.
6. Not Updating Financial Documents
   
   If your ex is still listed as a beneficiary, they could legally inherit your assets—even if that’s the last thing you want. Wills, trusts, life insurance policies, retirement accounts, powers of attorney—they all need a fresh look. Needless to say, it’s absolutely critical to make sure your money and choices go where you intend.
7. Failing to Build an Independent Credit Profile
   
   After divorce, your joint credit history doesn’t follow you. You’re on your own—and that can be a problem. Many newly single people find out too late they don’t have enough credit in their own name which makes it harder to rent an apartment, get a loan, or qualify for a mortgage.
   The best thing you can do is start rebuilding now. Open a credit card in your name. Pay it off on time. Keep balances low. Remove your name from joint accounts if possible. Good credit is your ticket to financial independence, giving you flexibility, stability, and leverage. 
8. Going It Alone Without Professional Guidance
   
   Divorce is complicated. Trying to handle the financial side on your own can make it worse. Laws, taxes, investments, retirement accounts—it’s a lot to juggle when you’re already under stress. One wrong move can cost you years of progress.
   
   You need someone in your corner. Someone who sees the full picture and can guide you through it. That’s what we do at Dunnigan Financial. We help people make clear, confident decisions with professional financial planning services. No judgment. Just smart, steady support aligned to your situation. You don’t have to guess your way through this. If you have any questions or need help navigating the financial turbulence of a divorce, contact us today!

Disclosures: 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.