Divorce is never an easy thing for families to go through. Apart from the emotional toll divorce can place on families, individuals going through a divorce can often experience financial challenges as well. Legal fees, losing your spouse’s income, not knowing what will happen with your assets — these are all things that can be concerning. The stress that comes from a divorce can often be escalated by the financial challenges without proper planning in place.
It is easy for us to talk about divorce and say the best way to prevent financial, emotional, relational hardship is to simply prevent divorce from happening. And while this may be true in some cases, the unfortunate reality is that sometimes divorce is not preventable.
Studies show that women typically suffer more financially in a divorce than men. Perhaps the reason is because, in 67% of marriages, the husband is the primary breadwinner. This is not to say that men don't have their own challenges in a divorce, but this is why we are focusing specifically on women in this article. We’ve walked many clients through the financial challenges of divorce and have compiled a few tips for women who might be finding themselves in the process.
1) Put together a post-divorce budget
Budgeting for a post divorce lifestyle is an overwhelming process. It can be discouraging as well. You know that your household income is going to take a hit, but seeing it on paper can be tough. Remember that this is the present. Try and set your emotions aside and truck through it.
If you weren’t the one managing the finances in your marriage, the basics of budgeting is simply projecting your monthly income and expenses, ensuring you are living within your means. Be sure to include ALL future monthly income which includes not just income from your employer, but any alimony, child support, bonuses, etc.
If you haven’t yet determined your post-divorce living arrangements, it is still good practice to start the budgeting process early as it can help guide your decision making process.
2) Try to avoid making financial decisions based on emotions.
What happens during the divorce settlement will have long-term implications to your financial future. Given the emotions involved and the speed at which big financial decisions are coming at you, it might be tempting to settle for less than what you deserve, perhaps because you aren’t up for a fight.
For example, you might have an emotional attachment to the family house but the mortgage will not be manageable on your new income. These types of emotional decisions can make a big impact on the future of your finances.
3) Don’t plan on Alimony
Alimony is now awarded in just 10% of divorces. While 97% of the time alimony is awarded, it is awarded to women, the reality is that most of the time the judge believes both parties are capable of supporting themselves. Especially when no children are involved. It is best to assume that you will not be supported through alimony, and plan accordingly.
4) Have assets appraised
A professional real estate appraisal is essential. Regardless of who is keeping the house, you need to know what your asset is worth. Other high value items such as paintings, jewelry, antiques and collectibles are all things you might want a professional appraisal on.
5) Think long-term
Long-term planning is important in any situation, and something we preach endlessly. What are your future financial goals, and how is a divorce going to impact them? Your household income is likely dropping, but your expenses are changing, your tax situation is changing, your assets and liabilities are changing. Now is an ideal time to meet with a financial professional to help guide you through the many complex financial challenges of a divorce.
As much as we wish for strong and joy-filled marriages, the reality is that close to half of marriages end in divorce. It is our purpose to meet you at whatever stage of life or challenge you might be going through, and help you navigate the path to a better, more secure future.