What Divorced Women Need To Know About Money
“Two major trends are profoundly impacting women. One, women are living longer—longer than men. Two, nearly half of marriages are likely to end in divorce, with rising rates among couples over 50. “– UBS report “Know Your Worth.”
Divorce rates in the United States have been decreasing for several years. Unfortunately, there is one segment of society that is going in the opposite direction. Due to a variety of reasons, including the fact that divorce no longer carries the stigma it once did, the divorce rate for Gen-x and Baby Boomers has DOUBLED in the last 25 years.
It isn’t just folks on their second marriages who are finding themselves divorced later in life, either. A majority of divorces among people over 50 occur in couples who have been married twenty years or more. Many people have a basic understanding of the financial, emotional, and even physical toll that divorce has on people. But there is further amplification of these consequences when the marital split occurs later in a person’s life.
Having undergone my divorce and having had friends and family members who have faced the same situation, I have made helping divorced people a high priority in my practice. I want to give divorced clients, especially women, the education they need to weather the trauma produced when a relationship ends. I want them to have the tools and skills they need to recover more quickly and move into the next phases of their lives.
There are a few things that women facing the end of their marriages should do as soon as possible to enable a smoother, less stressful transition to single life. These strategies will help them regain a measure of confidence and control over their financial lives and keep them from being blindsided by unpleasant “surprises.” Here are just a few ways in which you can lessen the impact of divorce on your finances.
Conduct an assessment of your situation. I realize it can be extremely tough to think about money when you’re still feeling vulnerable post-divorce. Nevertheless, you can’t get to where you want to be financially unless you know your current status. Finding your starting place entails performing a thorough, unflinching survey of your cash, debt, assets, credit, and retirement plan. An examination of your finances might indeed feel like a daunting and painful task, especially if you are like many divorced women who abdicated financial responsibility to their husbands during the marriage. If you let your husband take care of financial matters during your marriage, you might find it challenging to transition to financial independence and self-reliance. But, you have to do this if you want to heal and move forward. To make things more comfortable and efficient, I suggest having a trusted financial advisor or CPA help you with this critical step.
Make a budget: Living lean now will make all the difference in how successful you will be later. While it is tempting to blow off steam after your divorce and purchase high ticket items that give you some temporary relief, you should think deeply about every penny you spend. Write down each expenditure, look for frivolous things you can cut out completely, and learn about the discount and special rate programs for which you may now qualify. For example, one woman I know found a plan for single mothers that reduced her electricity bill by 30%.
Start building a financial life raft. Everyone needs that all-important emergency fund. When the divorce trauma has died down, you will feel more secure knowing that you have a few months of savings to help you through any rough patches. Some women-oriented websites suggest that you can raise cash by taking a look at items you may no longer want to keep. Things such as your engagement or wedding ring, gift items for which you no longer have any use, or collectibles might yield some quick cash. There is a whole new array of apps and websites devoted to quickly auctioning or selling everything from used clothing to accessories, to jewelry and collectibles. You can use this cash to fund your life raft.
Learn about income planning. Even younger women will want to discover more about the idea of income planning. Most conventional financial planners focus on the accumulation phase of a person’s life, without answering some essential questions: “Will I have sources of income in retirement that I cannot outlive? Will I have multiple streams of income that will kick in when I no longer can work or when I no longer want to work?” The recent pandemic alerted a lot of people to the fact that it is critical to have multiple streams of reliable income to take you through tough times. Discover ways that you can ensure you won’t run out of money when you get older.
Make Your Money Do Double, Even TRIPLE Duty. Old school planning often has you earmarking every dollar for a specific purpose. There’s the old-fashioned “bucket” philosophy where you have a bucket for living expenses, a bucket for debt, a bucket for retirement. But, what if that is the wrong way to think about your money? What if those dollars could be re-positioned to accomplish multiple goals? What if one dollar could be made to do the work of THREE, even FOUR?
A seasoned financial advisor with an intimate knowledge of concepts such as the velocity of money, tax erosion, and safe money and income planning will be able to help you make every dollar pull its weight and then some!
A divorce is a traumatic event, but it doesn’t have to mean a life of hardship, struggle, and anxiety. With a little knowledge and help from a trusted advisor, you can build a life after divorce that is financially sound, secure, and a lot less stressful. If you’d like more ideas about how to make your financial future “divorce-resistant,” call my office.