If the TV shows and movies were to be believed, all women walking away from divorce would have at least 50% of their partner’s net worth, dripping in Chanel bags, and climbing into a brand-new Mercedes.
Real-life, however, is very different. Divorce is emotionally and physically draining, but it often also seriously impacts your financial health. In fact, 54% of women say they saw their credit score drop during or after their divorce. So if you’re about to go through a divorce, or have already done so, what financial pitfalls do you need to be aware of and what can you do?
Adjusting to Single-Income Life
A dual-income means a better standard of living, a bigger house, more spending money, maybe even a better neighborhood. When your income decreases, you’ll often have to make some serious changes in order to have a comfortable lifestyle. To make matters more difficult, women often take custody of children in the relationship, and despite child support payments, end up shouldering most of the financial responsibility for them, too.
Financial Secrets Revealed During Divorce
One of the unfortunate things that often surface during a divorce are “surprise” expenses. These may be secret bank accounts, unknown debt, a lack of assets when one partner believed they were in good financial standing as a couple, when really the other was betraying their trust and wasting the money.
These are unfortunate and heartbreaking surprise expenses, and the best thing you can do is give yourself time to recover financially, work with your lawyer to minimize your personal damages, and work with your financial planner to plan for a better future.
Taking Responsibility for the Debt After Divorce
Most couples have some form of shared debt, and when the divorce is finalized the 50/50 responsibility for paying off that debt isn’t always respected. If the divorce is amicable and both people are in good financial standing the debt can be paid off smoothly, but if one partner is less financially stable than the other they may be unable to pay the debt, or knowingly choose to ignore it.
The problem is, while the judge may order someone to pay a joint credit obligation, if they choose to ignore their responsibility and leave you to shoulder it your credit rating will suffer and the lender will come after you for the debt. This leads many women to pay off a debt that wasn’t theirs, simply to protect their financial and mental health.
The best thing to do, when possible, is to pay off your half of the debt and get your name removed. Debtors won’t always do this, but it’s worth asking. If you need more guidance, a financial planner will be able to advise you on the best way to move forward for your circumstances.
The Legal Costs of Divorce
Divorce is expensive – even if it moves forward smoothly. The average divorce in the US costs $15,000 per person. This is the kind of figure that women feel financially for decades, especially for women who left the workforce to be a stay at home mom. Unfortunately, there’s little you can do to minimize these expenses if your ex-partner is unwilling to cooperate with you.
Additional Healthcare Costs Due to Divorce
The divorce proceedings may require one spouse to get their own, or additional, healthcare coverage. Depending on your own health and the health of your children, this can be a tedious and costly process, and can eat seriously into your new monthly income.
If you are required to do this, shop around and try and get the best deal you can. If you’re on a restricted income, do some research and see if there are any programs or alternative ways of getting the healthcare coverage you need, even if it’s only a temporary measure until your life has stabilized.
Division of Assets and Financial Setbacks
If you and your partner were in a high-income bracket or together for a long time, you likely have a retirement or investment portfolio together that will have to be divided. If you’re on good terms with your spouse, discuss how you will do this moving forward to protect both of you, and if you’re not, work with your lawyer to protect your own interests.
You also may find that divorce brings new financial sacrifices such as returning to work when you’ve been out of the workforce to have children, getting a second job to support your family, starting a side-business to supplement your income, or simply adjusting how much you spend in each area of your budget to your new income level.
This is always tough, but take it slowly and set up a new budget and see what you’ll need to do to support your lifestyle and financial goals. Of course, if you need additional support, a financial planner will be able to give you a hand to hold when necessary and help you see through the clouds.
Women often face a set of unique financial challenges during divorce, and many end up suffering financially if they don’t receive the support they need. If you’re looking for financial advice during this difficult time, you need to work with us – WeRise was created for women by women, so we’ll never talk down to you and give you completely personalized advice.