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You think weddings are expensive? Try getting a divorce.

Most people are completely unaware of how financially devastating it can be to break up a marriage, says Laurie Campbell, executive director of Credit Canada.

"The biggest mistakes I see are people underestimating how much it will cost, not preparing for that ahead of time and using credit to supplement their financial needs, which can land them in serious trouble," she says.

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The complexity and cost of each divorce depends on the couples' situation: whether they own a home, whether they have kids, whether they are both working, and also on whether it is an amicable split.

Dividing a huge asset like a family home is a challenge, Ms. Campbell says. If they cannot agree or afford to have one person buy the other out, the couple can sell the house and split the money.

But dividing debt is even more complicated, Ms. Campbell says. "We see this here all the time – where one spouse has racked up joint debt and the other spouse is on the hook."

If you are thinking about getting a divorce, Ms. Campbell suggests you think about these financial considerations.

1. Whose debt is it? Decide who will be responsible for the debt you as a couple have incurred – things like credit cards, lines of credit and mortgages. If you have a secondary credit card, you will be considered responsible for the debt – unless you can prove that you never used it.

2. Educate yourself. If your partner has been responsible for looking after the family finances, brush up on your financial literacy. If you have been a stay-at-home parent, your work skills will also need to be updated. To cut costs, look into free courses via community agencies or the government.

3. Check your credit rating. Even if you trust your spouse, order your personal and joint credit report from each of the two credit-reporting agencies, Equifax and Trans Union. If unknown debts have been racked up under your name, overlooking this could cost you years in debt repayments. If you have signed up for any type of credit and your spouse used it, you are responsible.

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4. Pare back your lifestyle. Be prepared to live without the perks that your relationship affords you and your children. The cleaning lady, your children's summer camps, overseas holidays, as well as lavish spending on clothing and dinners out might have to go. This may be your new reality.

5. Create an emergency fund. You never know when you're going to get mad and throw in the towel with your relationship, so it's a good idea to set aside some "mad money." Ideally, save between three and six months of living expenses to cover rent, utilities, food, transportation and other necessities.

6. Create your single-life financial plan. Freedom does not come cheap. You will need to figure out moving expenses, first and last month's rent, utility deposits and other expenses that you think you will need to move on with your new life. If you need help creating a budget, contact your financial planner or visit a not-for-profit credit-counselling agency for assistance.

7. Get a lawyer. Find out your legal rights prior to proceeding with divorce. By doing your homework, you may be able to save time and money. Look up the Federation of Law Societies of Canada for the list of lawyers near you. A lawyer will help you decide how to divide things like the family house and cottage, as well as investments like TFSAs, RRSPs, so on.

8. The taxman cometh. When dividing up your assets, look into the tax implications of the assets you each take and try to reduce the taxman's share. For instance, a couple with both a home and a cottage should know that once they separate, they will each be able to use principal residence exemptions to shelter properties from tax. So, it would make sense for each of them to take one of the properties.

Roma Luciw is the web editor of the Globe Investor personal finance site and writes for the Home Cents blog. If you have an idea for a set of personal finance tips, email her at

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About the Author
Personal Finance Web Editor

Roma Luciw is the Globe and Mail’s personal finance editor. She has worked at the Globe as a business journalist since 2001, covering stock markets, breaking news, and most recently anything that helps regular Canadians manage their own money. More

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