Emotional stress during your separation is inevitable. It's important to not let that stress impair your financial decision-making skills. Beware of common financial mistakes.

Staying “House Poor” for the Kids

Often the knee-jerk reaction to a breakup is to do whatever it takes to maintain the status quo for the sake of the kids. If your kids are still home, this often means feeling compelled to keep the house. Watch out! You may be giving up bargaining power for no benefit. Your kids may or may not have an easier time with the divorce if you stay in the house. That is hard to predict. What's easy to foresee is that keeping the house as an asset could put your future financial security at risk. It costs money to maintain a house. If you're dividing assets with your ex, and you end up with a lot of home equity but not much else in the form of retirement or in emergency liquid savings, it will be difficult to keep up the home maintenance. Strongly consider whether selling the house, splitting the proceeds, and buying into something new that you can afford on your own income is a better option.

Miscalculating After-Tax Asset Values

There are a lot of gray areas in separation negotiations; one of these is calculating the value of the family's assets. Investment accounts are easy, because the value is simply the total printed on the statement — give or take a bit of capital gains tax. There is room, though, for different interpretations of the value of retirement plans and pension incomes.

Income is taxed at different marginal rates depending on the other income received that year. An argument could be made to calculate after-tax value of retirement account withdrawals at different tax rates. The present value of a pension payment can be calculated differently depending on whether a higher or lower interest rate is used in the calculator. This is why it's important that you get feedback from a financial planner and that you educate yourself on how these calculations are made to be sure you're agreeing to a fair deal.

Not Planning for Cash Flow

Separations take a long time to sift out, and money can get tight if you're paying legal bills and counting on regular support from your ex. If you're expecting to separate, think about expenses before you start the process. Make sure you have liquid cash available in savings and that there are no outstanding bills that could drain that savings after the separation. Be sure the utilities and other household bills are current; check that income tax returns have been filed and taxes paid; make sure the real estate taxes and the escrow account through your mortgage company is up to date; and take care of any deferred home maintenance, especially if you're planning to stay in the home.

Undervaluing the Career

Staying home or working part time in order to act as the primary caregiver to children has a huge amount of value. An economics professor might calculate the value by comparing it to the amount of salary the caregiver is willing to forgo to stay home. This number is theoretical, but it makes a point. You give up a huge amount of future potential earning power by staying home. Many people discount this value by not insisting on the alimony they're due, or by making other financial concessions. This is a huge mistake. If you spent the years from your 30s to your 50s raising kids while your spouse continued on the paid career track, his earning potential will be stronger than yours after a divorce in your 50s. You'll never regret your decision to focus on raising your kids; don't discount your value by not insisting on the support you deserve after they're grown.

Playing the Financial Victim

The emotional stress of separating from a long-term partner is enough to make anyone fall into the trap of playing the financial victim. Relationships seldom fail for any one reason. Don't let guilt over something you did — or think you did — or anger about your partner's behavior affect your financial decision-making process. Don't rush to make choices that you may regret later. Take yourself through the process at the pace you feel allows you to make educated decisions. If you're starting with little financial savvy, put things on hold until you have knowledge enough to work with your advisors to make the best choices for your future.