Divorce is never easy. Even when the split is amicable, a divorce means significant life changes for both men and women. If the divorce is not amicable, it can be even worse. Questions about alimony, child support payments, property division, and child visitation rights can often result in long and drawn-out negotiations which can be quite acrimonious.
For women involved in a divorce, there is an additional hurdle to negotiate: managing finances during and after divorce. For too many women, this comes as an unwelcome burden. After divorce, when women must learn how to start a new life, make decisions about whether to look for a job or continue to stay at home if they have children, or even look for a new place to live, realizing that they have new financial responsibilities may come as a shock.
How Divorce Impacts Your Finances
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Overall, financially speaking, marriage is a good thing for women. The median weekly earnings of a married woman are 20% higher than women who were never married, divorced, separated or widowed, according to the U.S. Bureau of Labor Statistics (BLS). Married women earn 9.6% more than men who are not married (but almost 25% less than men who are married).
However, divorce can have a devastating impact on a woman’s finances. According to a 2012 report from the U.S. Government Accountability Office (GAO), a woman’s household income tumbles by 41% when she gets divorced. That is almost double the financial loss that men experience.
This is true whether women lived in a two-income household or were supported by their husbands. In heterosexual marriages where both partners were employed, for every dollar earned by men, a woman only earns $0.82, according to the BLS.
One reason why women earn less than men is because they are often called upon to play the role of caregiver for their children and/or aging parents. This means that women in the workforce are often required to leave financially promising jobs early in their employment or take reduced hours that limit income and promotion.
Although women understand that divorce can have financial ramifications, they are often unaware of how deeply it can affect their lives.
In a study by the online marketplace Worthy which surveyed almost 1,800 adult women in three stages (those who had divorce on the horizon, those who were in the middle of a divorce and those who describe themselves as already divorced), 46% of those surveyed said that divorce resulted in more than a few financial surprises. Those financial surprises included:
- Not knowing about the total amount of the debt they had accrued during marriage. This included financial matters like auto financing, primary mortgage, credit card debt, student loans and 401(k) loans
- Failing to anticipate the need for a return to the workforce
- Failing to understand that alimony and child support only last for a specific period
- Assuming they would receive more in alimony and child support
- If they received health insurance through their spouse’s workplace, discovering the cost of health care for themselves and their children can be staggering
- Believing that they would have the right to keep their primary residence
- Underestimating how much it costs to get a divorce
There are emotional complications after divorce as well. Many women want to resolve this difficult situation as soon as possible. Others feel guilty about their failed marriage, and so don’t negotiate for a fairer settlement with their ex-spouse. Still other divorced women believe that their former husbands will keep all of their financial promises they made before the divorce was finalized. Sadly, this is not always the case.
One of the reasons why a woman’s financial situation following divorce can be so bleak has to do with how women handle finances while they’re married. The Worthy study mentioned above found that many women had given total financial responsibility to their husbands. This was more prevalent among younger women than older women, as only 18% of women over the age of 55 had given total control of the family finances to their husbands, while 23% of women between the ages of 18 and 54 had done so.
This finding was confirmed by yet another study, this time by UBS Global Wealth Management. Their report, called “Own Your Worth,” found that 56% of the married women surveyed left all major financial decisions to their husbands. The survey also found that millennial women were more likely to do this than women from the baby boomer generation.
This is a problem because, after a woman gets divorced, she becomes responsible for all household financial transactions. She must earn money, pay bills, and also save and invest for her future. This is why women who had not taken a role in managing finances during their marriages often have a difficult time adjusting to this new role after divorce.
Managing Finances During a Divorce
For women involved in a divorce, regardless of their age, it’s never too early to start to learn how to better manage your finances. This can start while divorce proceedings are underway.
Women who are involved in a divorce should create a checklist that outlines all of their financial priorities. This includes day-to-day finances, property maintenance and providing for any children. This will help during the negotiation process and in getting a better settlement. It also helps to reduce the stress after divorce often caused by thinking, “I should’ve gotten a better settlement.”
In a MassMutual column about financial tips for women who are going through divorce, Michael Briggs, an investment advisor representative from Horizon Investment Management, stressed the need to create a budget. His advice was to do so before any divorce is final, because “you only get one chance at a property settlement.”
This is particularly important for women who will receive custody of their children and ownership of their primary residence. Their budget must include funds to maintain their household and for childcare. This includes children’s activities like afterschool sports or recreational activities.
Other useful tips for women involved in a divorce include:
1. Recognize the Need for Financial and Legal Advice
While it might be tempting to save money by undertaking a do-it-yourself divorce in an effort to avoid court and get everything over as quickly as possible, this is not the best idea. A do-it-yourself divorce can work if your split with your spouse is extremely amicable and you are confident that they have told you about all your financial assets and if you agree on all key issues like child support and household maintenance.
As we noted above, though, this is sadly not the case in most divorces. If things become more acrimonious or complicated, it’s extremely important to get professional help. While attorney fees can sometimes run as high as $250 an hour, an attorney can make sure you receive a much more equitable and fair settlement.
Financial advice is also important. If you believe your spouse is hiding assets, think about hiring a forensic accountant during the divorce proceedings so you know where all of your joint assets are located.
2. Do Not Heed Unsolicited Advice
During a divorce, a woman will receive all sorts of advice from family members or friends. Tales of horrible divorces or even amicable ones will be readily available. Even coworkers will tell you the “best thing to do.”
Don’t listen. Better yet, tell as few people as possible that you’re getting divorced. Every divorce situation is different, and yours is unique as well. If you have family members or friends who you really trust and who know you very well, they may have useful suggestions. Otherwise, if you need help, rely on professionals.
3. Be Financially Savvy
Being financially savvy means doing things like closing joint credit accounts. Remember: as long as you and your ex-spouse maintain a joint credit account, both of you are responsible for paying off that debt. You should also start separate checking accounts.
Update important records like your change in marital status for taxes, utilities and property titles. It’s also a good idea to track your income and expenses. When you do this along with creating a budget, it will give you a good idea of what your future costs may be after the divorce.
4. Remember Your Retirement
Since so many married women rely on their husbands to make financial decisions, one of the decisions that they often neglect is putting money aside for retirement. This is particularly true for women who are age 55 and older. The average lifespan of an American woman is over 80 years. It is a sad but true fact that many divorced women live in poverty because they have outlived the meager amount of money they have put aside for the retirements.
This is why it is important that when you’re negotiating a divorce, you receive a fair share of retirement assets. This is so important that it may be worthwhile to concede other assets to your spouse too, like ownership of a car or even the primary residence. If you do receive retirement assets, it is important that you do not cash them out as a way to pay your current expenses. You will need them later in life.
Managing Finances After Divorce
Once the divorce is final, this doesn’t mean you can stop paying attention to your finances, even if you have carefully planned during the actual divorce proceedings. For many women, the idea of managing financial matters on their own can be daunting and a little overwhelming.
The key is to think of managing your own finances not as frightening, but rather as an opportunity to create a new future for yourself and reevaluate your financial plans.
This is the first step toward smart money management. There are many online tools that you can use to track your current income and expenses. Even if you don’t have a solid understanding yet of what your income and expenses will be like post-divorce, that’s okay. Use your best guess. Over the coming months, you’ll have a much better idea of what these figures will be and you can adjust your budget accordingly.
The reality is that you may have to spend less — a lot less, in some cases, until your finances are more stable. In an article for credit card company Discover, Jackie Pilossoph, the founder of Divorced Girl Smiling, said that keeping a detailed understanding of her income and what she was spending was critical. She called utility companies and had her bills reduced, either through new subscription plans or by negotiating a better deal. She reduced her personal expenditures and didn’t buy herself new clothing for two years. In the end, this helped her restore her financial stability.
2. Build Credit
Married people negotiate for credit together. During a divorce, however, you will likely close down or remove yourself from any joint accounts. This can have a serious impact on your credit rating, meaning now is the time to establish your own credit history.
The best way to start is to get a credit card in your own name. This can be difficult if you don’t have one or you have a poor credit history. One trick is to apply for a secured credit card. This kind of card allows you to put down a deposit, which a creditor can use to make payments if you have trouble making them yourself. Your credit limit may be low and sometimes the fees can be high, but after a year or so, if you’ve made all of your payments on time, chances are good you’ll be able to convert it into a regular credit card. You may also think about developing a credit history through the use of a retail card, although this can only be used at the store where it was issued.
Make your payments on time, every time, and keep your balance low. Remember to check your credit report on a regular basis as well. Credit reports often contain errors, and it’s better to find out about them before they come back to bite you. Regularly checking your credit also lets you see if you have been a victim of identity theft. In more acrimonious divorces, some men have been known to try to take out credit in their ex-spouse’s name.
3. Focus on the “Four Walls”
The four walls are clothing, food, utilities/shelter and transportation. These are the essentials you should focus on in the first few months after a divorce. Your life will be much easier if you know you have these things covered. It can sometimes mean working more than one job in the beginning, but by focusing on the four walls, your financial decisions will be better. Bad financial decisions can make a tough post-divorce situation worse.
4. Post-Divorce Career Choices
Divorced women who were largely stay-at-home moms might want to continue in that role, but financial necessity means they might need to pursue new goals. In the divorced women’s financial study done by Worthy, 54% of the women surveyed had a major career change following their divorce. These changes included reentering the workforce, going back to school, switching jobs or starting their own business. Only 9% of the women surveyed were able to stay at home after the divorce.
Having more women in the workforce benefits companies and the overall economy. A recent Forbes article said that companies which have the greatest gender diversity see higher returns on equity, improved operating results and stronger stock price growth. Additionally, if a board of directors has at least one woman, the likelihood of bankruptcy decreases by an astounding 20%.
Securing Your Financial Future After Divorce
Divorces can be gut-wrenching. The reality, however, is that this happens every day to a lot of people. The average American divorce rate is around 42% to 45%. It’s higher in second marriages than in first marriages.
Sometimes facing all these new financial realities can feel overwhelming. Yet all you need to do is look around and see that there are many women who have survived their divorces, both emotionally and financially. Just because you’re no longer married doesn’t mean who you are, or what you are able to do, has changed.
Remember to focus on the essentials and to seek help in making rational financial decisions if you have to. And remember that getting divorced is not the defining moment in your life.
Your Fresh Financial Start and the Importance of Legal Counsel
If your post-divorce finances seem overwhelming, sit down with your attorney or a financial planner and begin the process of mapping out your next steps. An attorney can give you sound advice about investments and assets. A financial planner can help you create a realistic budget and give you a more solid idea of how long it will take you to achieve financial independence.
If you live in the Greenville or Charleston area and you’re looking for solid legal advice from an attorney with lots of experience helping women achieve the best results in divorce matters, you should contact Lauren Taylor Law. When you need experienced legal advice to deal with an emotional situation like divorce, it’s important to have a lawyer to help you achieve the outcome you deserve and need.
You can contact Lauren Taylor Law at 843-790-9009 or visit her contact page, where you can leave your contact details and some information about your situation. A member of the team will get back to you as soon as possible.
South Carolina divorce attorney Lauren Taylor practices family law in Charleston and Greenville. She graduated from the Charlotte School of Law, and has been practicing for more than ten years.
Since the firm’s inception in 2012, Mrs. Taylor has helped hundreds of people navigate the uncertainties surrounding the family and criminal court process.
She has cultivated a team that ensures each case has a strategy crafted specifically to the clients needs and desires.
Her commitment to top notch service has led her to open two additional offices in the low country where she now resides with her husband Michael and her golden retriever, Buster.