Episode #22: Why Smart People Make Bad Financial Decisions During Divorce (And How to Stop)
Divorce is one of the most emotionally and financially devastating events a person can go through. It is a time characterized by massive upheaval, logistical nightmares, and intense emotional pain. Yet, it is exactly during this period of maximum stress that you are expected to make some of the most consequential financial decisions of your life.
In a recent episode of The Divorce Circle Podcast, host Sabeena Bubber, Mortgage Broker with Xeva Mortgage sat down with Bruce Sellery, personal finance expert, bestselling author, and CEO of Credit Canada. They discussed why even the smartest, most financially literate people make terrible money choices during a divorce—and exactly what you can do to protect yourself.
The Danger of Emotional Decision-Making
When you are going through a separation, your brain is in survival mode. Fear, anger, and grief take the wheel, often pushing logic into the backseat.
“People lose sight of the long-term consequences of their actions because the short-term context is so overwhelming”
One of the most common examples of this is the battle over the marital home. Often, one spouse will fight tooth and nail to keep the house, driven by a desperate need for emotional comfort and stability for the children. However, they fail to run the numbers to see if they can actually afford the mortgage, property taxes, and maintenance on a single income.
Prioritizing emotional comfort over financial reality is a recipe for long-term disaster.
The 3 Biggest Financial Mistakes in Divorce
According to Sellery, there are three major traps people fall into when navigating the financial split:
Acting Out of Guilt
The Reality: Guilt is an emotion with zero financial utility. Giving up your fair share of assets because you feel guilty about ending the marriage only punishes your future self.
The Solution: Treat the division of assets as a business transaction. Remove the emotion and rely on the law to dictate what is fair.
Rushing Major Decisions
The Reality: Making massive choices—like buying a new house or cashing out investments—before the dust has settled often leads to regret.
The Solution: Wait until you have a signed separation agreement before making any major financial commitments.
Going It Alone
The Reality: Avoiding conversations about money because of shame or overwhelm guarantees you will make uninformed choices.
The Solution: Build a "divorce circle" of professionals (lawyers, mortgage brokers, financial coaches) to provide objective advice.
The "Chapters" Approach to Post-Divorce Finances
One of the most liberating concepts Sellery shared during the episode is the idea of viewing your post-divorce life in "chapters."
The first year after a divorce is Chapter One: Survival. During this time, your only job is to get through the day. If that means spending more money on takeout because you are too exhausted to cook, or paying for extra childcare so you can process your emotions, that is okay.
“It’s important to recognize that this phase is temporary and won’t dictate your long-term behaviour”
Once you are out of the survival chapter, you can move into Chapter Two: Rebuilding, where you adjust to your new financial reality and begin living within your new means.
5 Steps to Rebuild Your Financial Confidence
Many people wait until they "feel confident" before they start tackling their post-divorce finances. Sellery argues this is backwards: action creates confidence, not the other way around.
Even if you don't feel like it, you need to take these five steps:
Lay the Foundation: Understand your current context. What is your income? What are your debts?
Determine What You Want: Set clear, tangible goals for your new life.
Develop a Plan: Create a realistic budget that aligns with your new single-income reality.
Take Action: Execute the plan, even when it feels overwhelming.
Stay Engaged: Build sustainable financial habits that will protect you long-term.
A Crucial Mindset Shift
If budgeting feels like a chore, you are looking at it wrong. Instead of viewing money management as a restriction, shift your focus to the purpose of the money.
Ask yourself: "What is my money for?"
Frame your answer around empowering concepts. Is your money for security? Is it for adventure? Is it for independence? When you connect your daily financial choices to a deeply held personal value, managing your money stops being a chore and becomes an act of self-love.
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For more expert mortgage and financial advice, visit Sabeena Bubber's website. To learn more about non-profit credit counseling and debt management, visit Bruce Sellery at Credit Canada.