Divorce has a heavy impact on the partners in a marriage. It may take time before both of them can adjust to the new life and move forward. Women bear the greatest impact of the breakup especially emotionally and financially.
Financial impact of divorce on women
A stable marriage can propel you in your efforts to build and maintain your wealth. The shared responsibilities and synergies can help earn more, save more and make good investment decisions. However, divorcing your spouse can impact financially on you as a woman in many ways
- You will have to take care of necessities such as shelter, food and healthcare on your own. In many cases, the family home is sold, and proceedings shared among partners leaving you without a home.
- You have to take care of the kids on your own. If the kids are below the age of 18, much of the parenting responsibility will fall on you. Sadly, a large number of divorced mothers do not receive full child support payments.
- You might lose health insurance for a time after breaking-up if you had jointly taken a family health cover with your partner.
- According to a study conducted by the U.S Department of Health and Human Services in 2014, one in five divorced women will fall into poverty. (The poverty line for a family of at least three is about $20,000 a year. There is a real threat that parting ways will mess with your financial standing.
How do you protect your cash during the proceedings?
One way to mitigate the financial problems that come after parting ways is to protect as much wealth as possible when the proceedings are looming. Here a few ways you can improve your chances of keeping your money
1. Take stock of all your assets and debts
Determine the value of your assets which you own individually and jointly with your partner. There should be a list of marital and non-marital assets at the floor of the court.
2. Sort out your rent, mortgage and other long-term payments
Determine who pays for what among the long-term loans. You can decide which partner to keep the home or another asset under loan or sell it to free yourself from the responsibility.
3. Look at the retirement accounts
If you are saving together for retirement, these funds are considered marital property. If you live in a community property state, 401(k), pension and 403(b) contributed together with are split by half.
4. Secure all your liquid assets
If you have been contributing to a joint account, you may need to get some cash on your own. Open a bank account under your name and save on the account. It may take a while before you access to cash in a joint account if the spouse is not cooperative.
What if you own a business or are self-employed?
Remember that your tax status may change after parting ways with your partner. Other factors such as alimony payments and a list of dependents may change. Talk to a tax expert to help in filing tax returns.
If you jointly own the business with your spouse, consider buying off his stake in the business. Otherwise, you may be forced to sell off the business and share the proceedings. Seek professional help in determining how much equity that the spouse has in the business. This part requires negotiation as the judge may consider appreciation in business value as marital property and order the business to be sold.
You should also know the true value of your business and earnings or profitability. This will be used to determine if you need alimony payments from your spouse or vice versa. Without the true value, your spouse may take advantage and increase the perceived earnings.
How to recover financially after divorcing your spouse
After you are on your own, it is time to get your finances in order. The sooner you take charge of your financial course, the better it would be for you. Here a few tips on ways to recover financially after you have parted ways with your spouse.
1. Take stock of your financial status
Give yourself a while to heal from the process. After this, start calculating your net worth. Determine your assets, streams of income and debts. Include the value of your equity in a shared property. You may need the help of a financial advisor to get an accurate picture of your finances.
2. Create a budget
Create a realistic budget for your needs. Your living standard may change according to your financial standing. Go for what you can afford with an eye at increasing your savings. Do not forget essential services such as health insurance that might have been jointly owned.
3. Create a wealth building goals
Your wealth building plan should include your retirement, a permanent home if you do not have one, increasing your net worth and leisure to heal your marriage wounds. Retirement is a top priority followed by owning a house. However, you may put off owning a house until you are stable.
4. Create a plan
Create a plan for ways to improve your financial standing. You may need to look for a better job and open a business on the side to improve your income. A financial advisor can also come handy to help in investment decisions.
5. Automate your payments
The best way to ensure that cash is used as planned is to automate the transactions. Once a salary comes in, ensure that it gets to the retirement contribution and savings. Automate recurring bill payments and contributions to investment accounts. This way you will only be left with cash for your personal needs and will have a hard time managing your budget.
6. Be prepared for possible risks and pitfalls
Protect your money and the future of your loved ones in case of illness, death or lost income by taking appropriate insurance covers and saving for emergencies. This also saves you from the need to get expensive loans when faced with an emergency.
Face your divorce from a financial perspective. Preparing for possible shocks improves your chances of keeping your money after the spouse has left. Your financial actions after you part ways with the spouse also determine your financial standing into the future.
If you want to learn more about this, I’ll be teaching on this and more at my upcoming WealthyWellthy Live event in Austin, Feb 8, 9 and 10th, 2018. Join me! Get you tickets today.