Divorce and Your Finances: Tips for Keeping Emotion Out of Your Decision-Making

Five Ways to Ensure Your Feelings Don't Get the Better of You

Kathy Longo, CFP®, CAP®, CDFA Wednesday, 10 March 2021

Divorce and Your Finances: Tips for Keeping Emotion Out of Your Decision-Making

Most of us don’t plan for divorce. Nearly every aspect of life changes in an instant when it happens, which is devastating and can take a toll on your willpower and decision-making skills. Divorce is mentally and emotionally draining. It is also fraught with practicalities that must be addressed so that, when the dust settles, you find yourself standing on solid ground between divorce and your finances.

Divorce nearly always impacts your money, undermining a great deal of the financial planning and wealth-building that a couple accomplished during the marriage. It can be emotionally challenging – even draining – to delve into all these issues. However, those who let financial decisions slide while they’re going through a divorce risk leaving their financial future in the hands of their ex-spouse. To avoid this situation and to keep your emotions in check, use the tips below to keep your feelings out of your financial decision-making when you’re navigating a divorce.

1.     Keep Records and Plan Ahead

Divorce is a complicated process. It can be beneficial to consult with legal and financial professionals before you announce your intentions to divorce. You will need to have copies of tax returns, wills, trusts, financial statements, insurance policies, and deeds to property. All of these items will be necessary to determine how the finances will be divided and in what manner. Depending on how amicable your relationship is with your ex, these may be easy or difficult to retrieve after you start living apart.

2.     Be Assertive and Aware

Although it is important not to let heightened emotions get the better of you, it is also important to ensure that you get what you need (and deserve) out of the dissolution of your marriage. Having the means to take care of yourself, prepare for the next chapter of your life, and maintain a comparable standard of living is not vengeful – it is necessary and important. This requires having a healthy sense of control over the process, taking part in the negotiations, and not being a passive observer of your divorce.

SEE ALSO: How to Have an Amicable Divorce

3.     Engage in the Present… And Let Go of the Past

There is an overwhelming rollercoaster of emotions that comes with divorce. Maintaining a strong connection with being in the current moment can help you manage feelings of anger, resentment, sadness, and loss. (Listen to my Flourish Financially Challenge podcast episode, Owning the Moment, for more on engaging in the present.)

4.     Be Mindful

Mindfulness can help your subconscious release hard feelings and start to approach life with a “me” rather than a “we” mentality. Try not to think about “we.” That leads to feelings of loss, grief, and a reminder that “we” have been dissolved. Having a good support network will help you manage those feelings and channel them into new, positive experiences with others who love and care for you.

5.     Work with a Certified Divorce Financial Analyst (CDFA®)

Sometimes, working with an expert in divorce finances is the best way to remove your own emotions from the process. A Certified Divorce Financial Analyst (CDFA®) is a member of the Institute for Divorce Financial Analysts and has been specifically trained to help with the personal financial considerations throughout the divorce process.

Specifically, a CDFA®…

  • works with the divorce team to provide the client and lawyer with data that shows the financial effect of any given divorce settlement
  • appears as an expert witness if the case goes to court, mediation, or arbitration
  • is familiar with tax issues that apply to divorce
  • has background knowledge of the legal issues in divorce
  • helps clients identify their future financial goals, develop a budget, identify which kind of lifestyle they want, identify their insurance needs, and set retirement objectives
  • identifies the short-term and long-term effects of dividing property
  • integrates tax issues
  • analyzes pension and retirement plan issues
  • determines if the client can afford the matrimonial home and, if not, what might be an affordable alternative
  • brings an innovative and creative approach to settling cases

As you can see, it can be beneficial to have the assistance of a CDFA® as you navigate emotionally charged financial matters.

SEE ALSO: Coping and Managing Stress During Periods of Transition

Steps to Take After the Divorce

Challenging emotions don’t end once the divorce is final on paper, and there will still be financial matters to attend to. Use your divorce decree to make a physical list of the accounts that you have been awarded in your settlement so that you can start changing the account ownership. Be sure to include any insurance policies; insurance policies are often forgotten, but they’re important as they will allow you to provide for children or other dependents after you pass away. Sometimes, divorcees will inadvertently leave their ex as the beneficiary of life insurance policies and retirement accounts, creating surprises and undue hardship for the intended beneficiaries when the proceeds go to a former spouse.

You should also review any legal documents that you signed with an ex-spouse during your marriage. This can include documents related to health care and end-of-life decisions such as powers of attorney or living wills. Although rules about whether the documents remain valid after divorce varies by state, the best process is to revoke old powers of attorney and living wills and replace them with updated agreements, naming new individuals to act on your behalf for these critical decisions. Share the updated documents with the named individuals in your documents so they have the information on file and are fully aware of your future plans.

Final Thoughts on Divorce and Your Finances

Wading through all the financial matters that are tied up in a divorce can be an overwhelming and emotional process. However, if you use the above tips to help you navigate this life transition without letting your emotions compromise your financial decision-making, you’ll soon be ready to look forward to the opportunities in divorce. You can set new priorities for your life and finances, or even pursue a lifestyle that wasn’t an option when you were married. Envision your life ahead and walk toward your future confident in the knowledge that you are on firm financial footing.

For more on navigating the financial aspects of divorce and other life transitions, check out my book, Flourish Financially.

About the Author

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.


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