Divorce and Your Finances: Key Considerations for Navigating Life After "I Do"

From the moment you say "I do" until the divorce decree is finalized, you and your

spouse remain financially linked, which can be challenging. This situation raises many

questions, and circumstances can change over time.

Women often face significant economic consequences from divorce, with those under

fifty experiencing income drops of 23% to 40%, and those over fifty seeing declines of

about 45%. In contrast, men typically experience a more modest impact, with those over

fifty facing a decrease in standard of living of roughly 21%.

While these statistics are concerning, each marriage and subsequent divorce is unique.

My own divorce was a long, challenging journey that ultimately led to an acceptable

resolution for both my ex-spouse and me. Here are some key considerations I reflected

on before deciding to pursue divorce or separation:

1. How will this affect my cash flow now and in the future?

Cash flow refers to the movement of money into and out of your household.

Divorce can have a profound impact on your finances, so it's crucial to develop a

plan that addresses both your immediate needs and long-term objectives.

Review your income, understand your past spending habits, project future

expenses, organize your budget, and regularly monitor your cash flow.

2. I will be supporting two households in the foreseeable future. What are

my options?

Divorce results in splitting a family into two households, which often doubles

expenses. One option is to agree to "live together, but apart," which allows time

to work out budgets and custody arrangements. Create a plan that outlines

shared expenses to avoid financial conflicts and ensure fair contributions from

both parties.

3. I want to keep the marital home. Do you foresee any problems?

Keeping the marital home may not be the best decision, as it can lead to financial

strain. While it might provide stability for your children, you need to consider the

mortgage and ongoing expenses. After the divorce, you might find it challenging

to buy out your spouse or maintain the home.

4. I'm concerned about affording my children's college expenses and

activities. How can I manage these costs?

Divorce significantly affects children, and judges often require equal financial

support from both parents. This might require the parent who pays child support

to work extra hours, which could impact their financial stability. A reduced income

may also lead to children having to cut back on activities, which can complicate

college applications and discussions about financial aid.

5. How will this affect my retirement plans?

During a divorce, you and your spouse must determine how to divide assets,

including retirement savings. If you cannot reach an agreement, county or state

laws may provide guidance. Additionally, you may be eligible for Social Security

benefits based on your ex-spouse's earnings record.

Here are a few hard-won insights for you to consider:

Understand Your Finances

Know your cash flow, including income and expenses. Review and categorize

costs to assess potential financial impacts after divorce, including alimony and

child support. Post-divorce life can be unexpectedly costly, so plan accordingly.

Avoid Emotional Assets

Focus on valuable assets that provide long-term benefits, such as rental

properties or stocks, rather than emotional assets that offer no tangible gain.

Consult Your Attorney

Always consult with your divorce attorney before making any changes to assets,

as specific actions may be prohibited during the divorce process. Protect your

interests with legal advice.

Seek Professional Advice

Work with compassionate financial advisors and tax consultants to develop a

plan that considers the impact of tax laws on alimony and assets.

Remember Retirement Accounts

Retirement accounts can be divided without immediate tax penalties if done

correctly. Consult a financial planner to avoid costly mistakes.

Prioritize Kids’ Needs

Account for all potential child-related expenses to avoid disputes. Being thorough

ensures that you request the correct amount of child support.

Opt for Mediation

Consider mediation to avoid costly litigation. This approach can help you reach

agreements on assets without incurring heavy legal fees.

Plan for the Future

Post-divorce, lifestyle changes are often necessary. Adapt quickly to new

expenses to protect your remaining assets and ensure long-term stability, as

some may be irreplaceable.

The Second Act Money Guide Blog appears once a month. If you have

questions or need advice, please get in touch with Jason Cole at Full Court

Strategic Wealth at 267.970.6464 or jcole@fullcourtstrategicwealth.com. Visit the

website at https://fullcourtstrategicwealth.com/.