Disclaimer: The content that follows should not be considered financial advice and is merely a directional guide to help women.
How to Start Over Financially After Divorce
Unless we can get on stable financial footing after divorce, it is very hard to recover in other ways.
Financial insecurity after divorce is a real and reasonable fear. Even if we come from a financially stable marriage, often we have no idea how much or how little money we will have when the whole agonizing ordeal is over.
Some of us have to start over after divorce with no money at all. Some of us start out in the hole, financially. It’s not fair, but most all of us experience a lower standard of living after the divorce decree is signed.
Many of the messages I get from women going through divorce say they are worried about their finances. In research we did several years back, finances figured in the top three concerns for the 300+ women we interviewed. And everything is often up in the air for months and sometimes years while the divorce is finally settled, so we are basically in financial limbo all of that time.
I have had women at my Midlife Divorce Recovery conferences who were living in the Super 6 Motel or in their parents’ basement. One woman had even briefly slept in her car at night because she didn’t have any money after her divorce and was too embarrassed to go to a shelter.
Will I have enough money or will I become a bag lady after divorce?
Of course, these are extreme cases, but because I specialize in midlife divorce, financial issues are often, not just scary, they are terrifying. The truth is, women are almost always worse off financially after divorce. Men, by the way, are almost always better off. This gap widens the older we get.
This morning I talked with a woman whose soon-to-be ex was refusing to agree to any maintenance or child support. He had been having an affair for about two years and had also quit a well-paying job, thinking that would get him out of having to pay any kind of support.
She said, “I am in my late 50s, have been a stay at home mom for the past 16 years, and although I had a successful career, I do not believe I will be able to easily re-enter my field without going back to school and starting from scratch. By that time I will be almost 60.” That’s a devastating feeling.
According to an article in Forbes magazine, “ Women who divorce after 50 are especially vulnerable to financial difficulty, particularly if they have taken time away from paid work to be stay-at-home-Moms. Given higher incomes and more continuous work histories, men are generally much better positioned than women to weather the financial storm of a divorce. There is significant economic disparity between men and women, and the older we get, the more that dangerous gap widens. Researchers report that 27% of gray divorced women live in poverty, compared to 11% of divorced men of that age group.”
From the time we hear those words, “I want a divorce,” we have to figure out how to keep ourselves functioning emotionally and physically during this overwhelming and exhausting time. Many of us are barely getting out of bed everyday.
Then we immediately have to figure out the money part of our new after-divorce reality. We have to get help dealing with the legal and financial issues, but we also have to figure out a strategy to support ourselves.
If you have been working full-time during your marriage, the finances may not be as critical. However, for those of us who helped our husband establish his career and move up the professional ladder, we were often willing to give up our own career for that to happen. And after divorce, that puts us at a disadvantage. We hardly ever get the support we deserve,
Ex-husbands have often been preparing for divorce
Many times, the ex-husband or soon-to-be-ex has known he was going to get out of the marriage way before we realize anything is wrong. Sometimes, they hide assets. They open secret bank accounts. They take their girlfriend on trips and buy them expensive gifts while we are trying to stick to our budget at home, unaware of how our financial future is being threatened.
And the problem is not always another woman. Last week I got a letter from a woman whose husband had financial difficulty and hid it from her until they had to declare bankruptcy. Alcohol and drug addiction, porn, gambling — all can cause the destruction of a marriage. Regardless of what caused the divorce, we have to figure out how to survive financially.
Surviving financially becomes is a high priority when the divorce is certain to happen
Very few of us prepares for a divorce. The majority of us thought this would never happen to us. Then it does happen.
The first thing we must do is overcome emotional paralysis. Enrolling in a divorce recovery program like our Midlife Divorce Recovery MasterPlan is sometimes the very first step, because we help you deal with the shock of the divorce and then provide a concrete, practical roadmap forward. We can’t figure out our finances unless we’re getting out of bed every day and at least doing the basics to keep ourselves functioning.
Divorce Preparation: Assemble a Divorce Dream Team
- A divorce recovery program
- A divorce or family law attorney or mediator
- A CPA or financial advisor
- An estate planning attorney
I know many of you are thinking, “I can’t pay the mortgage, buy groceries, get my kids shoes! How can I afford to hire anyone when I’m having a hard time paying my own bills every month?”
First, ask around to see if anyone you know has gone through divorce and what resources they used. Word of mouth recommendations are helpful. Some community, religious or women’s organizations provide some free basic financial counseling to get you started. Ask your attorney for professionals he or she respects.
Get a divorce attorney involved as soon as possible. They can guide and direct you about when and how to file a petition of divorce and what actions to take so that you can get the best possible personal and financial outcome possible. Often, you think you can’t afford an attorney, but most of the time you can’t afford not to get an attorney.
What to do with the house after divorce?
When I was divorced, I was living in our marital home. He had moved into an apartment which he didn’t seem to mind because he could have his girlfriend visit him there. Three different times I let him come back home in hopes we could reconcile. He could never really give her up. So, he lived in three different apartments while I stayed in the family home.
One of the first people I called when the divorce was filed was the guy who had done our taxes for years. I went to his office and we talked about my financial situation. The first thing he told me was, “Suzy, you’ve got to sell your house as soon as possible! It would be cheaper for you to go stay at a nice hotel on the Plaza — and get room service than try to stay in this house.”
I knew I couldn’t stay in the house after the divorce because (1) I couldn’t afford it, and (2) it was too big. My one son still at home left for college just a couple of years later, so that was even more reason to leave that house.
I found a much, much smaller house with a mortgage I could afford. That house was just what I needed and a big step in my own recovery. I went to sales and flea markets and fixed it up exactly how I wanted it. It was warm and comfortable for the family to visit and not too big when I was the only one in it. Like Colin Powell said, “Home is where you are.”
Alternative Money Sources and Career Training
At the time of our divorce, I had a small business that I could spend more time on. It had never had to pay the bills before, but every dollar I made, made me feel proud of myself. My attorney told me not to go out and try to find a new job immediately, but to have the alimony and child support based on what I was making at the time of our divorce.
The courts sometimes allow funds for you to go back to school or to get some job training to be able to support yourself. My first thought was to hurry and get any job just to have some money coming in, but that often isn’t the best strategy. Talk it over with your attorney and financial advisors.
Financial Records & Documentation During Divorce
As soon as you know the divorce is going to happen, start getting your records in order. Keep track of everything you spend on your divorce — legal, financial, counselors etc.
Locate the documents from your marriage. Make copies of whatever you can and keep them in a file that you have instant access to. I hate to admit this, but I was one of those women who let my husband take care of all of the financial, investment, insurance and other money decisions. That was dumb. That was very, very dumb!
So, not only did I not fully know what a precarious situation our finances were in, but I hadn’t even paid the monthly bills. He was a math major and liked working with numbers. I was in graphic design and didn’t like paying the bills, so it worked out well … until our divorce.
After our divorce, I met with the president of a local bank who had been recommended to me. He brought in a box of Kleenex, sat with me in his office while I opened new accounts in my name only. He even gave me a loan to pay a bill that needed to be paid before the settlement details were concluded.
Develop a working relationship with a person at a bank who knows who you are and what your situation is. Get some credit started in your name only. Get off of joint credit cards.
Make sure you find out as much as you can about your marital financial situation. Before any settlement, make sure you know about all of the assets. This is where your dream team can be extremely helpful.
Here is a list of different kinds of marital assets:
- Common marital property assets: cash, all checking accounts, savings & money market accounts, retirement accounts, real estate, employer-funded incentive programs, deferred pay raises, bonuses
- “Hidden” assets: Get the last 5 years of tax returns – Schedules A, B, C, D, and E
- Forgotten assets:
- Employer provided assets – life insurance, health insurance, vacation pay, stock options pension plans, retirement savings plans
- Career assets – education, professional contacts, seniority, job experience, promotions, reputation
Taxes after divorce can get very complicated. One rule of thumb is that the person receiving alimony has to pay taxes on that money. The one paying alimony gets a tax deduction. Taxes have become a very specialized and complicated part of any divorce settlement, so talk to an expert about that.
Accept Your New Financial Reality
No matter how much or how little money you have, your first step is to find out precisely where you stand. Find out exactly how much you will have coming in every month and exactly how much you have going out. Put together a realistic budget.
That in itself is empowering, because it gives you a place to start. Especially if you are living on much less than before, a budget gives you confidence even when you make the decision not to buy something because you know you can’t afford it. And most of us can live on much less than we lived on before, even if it means downsizing and re-evaluating our needs and our wants.
If you have children, what you are learning about finances during divorce can be one of the most important lessons you teach them. Many kids have more than they need. It’s a valuable lesson to take a look at actual needs vs wants. They will have to live on a budget when they get older. Learning lessons now will make that transition to self-sufficiency easier.
Your Best Financial Path Forward After Divorce
You can take charge of your financial situation after divorce. All of us have to face our cold, hard monetary facts head-on. We must know where we stand … how much we have coming in … how much we have going out, and we must adjust to those realities.
Moping around about something that can’t be changed won’t help. Being constantly mad about our finances will not help them get better. Do not dwell on things you cannot change and things you cannot control. Instead, start a plan to improve your financial life, today.
One thing that has helped hundreds of women is connecting with other women who are on the divorce recovery road, too. Our MDR Community is a safe, secure online community of women on that divorce journey. Ask other members how they got back on their feet financially. They all know how you’re feeling and are willing to share what they have learned on the trip.
Our MasterPlan includes a 40-minute interview with a Certified Divorce Financial Analyst and a 16-page work section entitled “Get Financially Fit” with tips and tools to get more secure about your finances during and after divorce.
Start today getting on your way to financial stability, and that will help with all of the other areas of divorce recovery. Contact us. We’ve been in that place of financial insecurity because of divorce and we can help. The sooner you get started the better off you’ll be.