Essential Financial Planning Steps to Take Before Divorce

Divorce is not just an emotional turning point—it’s a financial one as well. Decisions made during the divorce process can shape your financial well-being for years, even decades, to come. Unfortunately, many people enter negotiations unprepared and unaware of what’s truly at stake.

Before you begin the legal process, it’s critical to take financial planning seriously. Working with a financial planner before divorce papers are filed can help you avoid irreversible mistakes, protect your long-term security, and give you the confidence to advocate for what you need.

Here’s why early financial planning matters—and what can go wrong without it.

Why You Need a Financial Planner Before Divorce

Divorce attorneys are trained in the law. Mediators focus on resolving conflict. But neither are responsible for analyzing the long-term financial impact of your divorce settlement.

A financial planner can fill this gap.

Financial planners with experience in divorce—particularly Certified Divorce Financial Analysts (CDFAs)—can help you evaluate the trade-offs in property division, understand the tax consequences of your decisions, and build a financial strategy that reflects your new reality.

They can also serve as a voice of clarity at a time when decisions are emotionally charged and rushed.

Common Mistakes in Divorce Agreements

Even well-educated, high-earning individuals can make costly financial missteps during a divorce. Here are several examples of what can go wrong without proper financial guidance.

1. Keeping the Family Home Without a Full Analysis

It’s common for one spouse—often the parent with primary custody—to want to keep the family home. While the desire is understandable, it can be financially dangerous.

Without analyzing the long-term costs (mortgage, property taxes, maintenance), you may take on an asset that drains your resources and limits your ability to invest elsewhere. A planner can help assess whether keeping the home aligns with your budget and future goals.

2. Misunderstanding the Value of Retirement Accounts

Not all assets are equal. A $500,000 retirement account is not the same as a $500,000 brokerage account. Retirement accounts are often taxed upon withdrawal, which reduces their real value. Yet divorcing spouses frequently split assets without adjusting for these tax implications.

This oversight can result in one spouse walking away with significantly less usable wealth than intended.

3. Overlooking Hidden or Deferred Compensation

High earners—particularly business owners and executives—may have complex compensation packages that include stock options, restricted stock, or deferred bonuses.

Without professional support, these assets can be undervalued or entirely missed during negotiations, leaving one spouse unaware of the full financial picture.

4. Agreeing to Unsustainable Support Payments

Spousal and child support are often negotiated based on current income and expenses. But what happens if your financial situation changes? Or if you’ve agreed to pay more than your budget realistically allows?

A financial planner can help you model different support scenarios, ensuring that you’re not setting yourself—or your ex-spouse—up for financial strain later.

5. Failing to Update Beneficiaries and Estate Documents

Many people forget that divorce does not automatically update the beneficiaries on life insurance policies, retirement accounts, or transfer-on-death designations. If you don’t address these items as part of your financial planning, your ex-spouse could unintentionally remain the beneficiary.

A financial planner ensures your estate plan reflects your new priorities and relationships.

Financial Planning Steps to Take Now

If you’re considering divorce—or suspect it may be on the horizon—there are proactive steps you can take now:

Get Organized

Gather documentation for all assets, debts, income sources, and monthly expenses. This includes bank statements, tax returns, retirement accounts, credit card balances, and mortgage documents.

Having a clear picture of your financial life is the foundation of a strong divorce strategy.

Build a Support Team

Your financial planner should work alongside your attorney, and possibly a therapist or mediator, to support your legal, emotional, and financial needs. Each professional brings a unique lens to the process.

Create a Post-Divorce Financial Plan

This includes revisiting your budget, retirement savings goals, insurance coverage, and estate documents. Your financial planner can help you model various scenarios so you feel equipped to move forward.

You Don’t Have to Go Through This Alone

Divorce can feel overwhelming—but it’s also a moment of agency. With the right financial guidance, you can avoid common pitfalls, protect your interests, and begin the next chapter of life on solid financial footing.

If you’re considering divorce, it’s never too early to involve a financial planner. The earlier you start, the more options you’ll have.

At Life Story Financial, we help women navigate divorce with clarity, compassion, and confidence. Schedule a consultation today to discuss how we can support you before, during, and after your divorce.