By Audrey Cade
If marriage is a wealth-building experience, then consider divorce a wealth killer! Between legal fees, expenses to establish a new residence, and less income coming into your household, you should be prepared for big lifestyle changes that accompany divorce! The last thing you need to worry about when you’re already tightening your belt, is unpleasant surprises.
These are the financial lessons I learned during my divorce. Some I was prepared for, while others continue to take me off guard. Benefit from what I have learned, and hopefully, you will have a smoother ride through this life transition!
What I Got Right
I understood that I would have to establish my own household, including a place to live, and all services in my own name. When my divorce was imminent, I began to separate myself off onto my own phone, utility, and bank accounts. We gave it about a month for these changes to take effect to make it easier to split any final bills and to start a fresh month under our own expenses before separating.
When the time is coming, be sure to:
Make a thorough review of your whole joint financial picture
Current bills, debts, loans, savings, retirement, and so on. Make copies of all important documents, and keep them in a safe place. Don’t allow yourself to be caught off guard by debts you were unaware of or to have assets hidden from you!
Determine, with your soon-to-be-ex, if possible, the best way to divide everything
My ex and I were fortunate that the only real thorn was our mortgage. We agreed to accept full responsibility for bills we had each created (our own medical or credit card bills), to keep our own retirement accounts and the cars we each drove so as not to complicate anything any more than necessary.
Many divorces become much more convoluted, especially if there is a large disparity in income, if one partner stayed home with children, or if the couple has investments, a business, and other such assets. In many circumstances, one spouse can stake a claim on a share of the others’ retirement and other benefits. When in doubt, seek counsel from a financial advisor or a lawyer to make you aware of your rights and help you sort out the details!
Open your own bank account
If you don’t already have an account solely in your name, this needs to be a priority! As soon as possible, start to have your pay and other funds direct deposited into this account to keep it safe, and transfer any funds that are yours to this account.
Evaluate your individual financial picture
With just your income and expenses required to survive (e.g. rent, car payment, utilities, groceries, and so on), what adjustments will you need to make in your life? How much time will you need to get on your feet without your ex’s income to share in household costs?
Set a budget
Once you have some figures to work with, develop a budget with anticipated costs, and move forward, staying within your means so that you don’t get over your head! This is really hard to do when you’re used to the safety net of another paycheck to help ends meet.
Work out your divorce details yourself
Thankfully, my ex and I ended our relationship through a dissolution. We were able to work out many of the details for how to divide assets and our parenting plan ourselves. When I first saw a lawyer, it was with the plan he and I agreed to. We had to negotiate through some tough points; but, the majority of our dissolution and parenting agreements were devised by us. This move saved us time and a lot of money, and it was our plan instead of what the court would have imposed on us!
What I Found Out the Hard Way
I do not claim to be a financial guru, so I definitely made some mistakes! Unless you go through such an experience, you’re unlikely to know the best way to handle certain situations; so, you live and you learn- right?
Hopefully, you can save yourself some headaches by not repeating my mistakes:
Don’t feel like it has to be perfect immediately!
I was concerned with giving my children the best home that I could after leaving their dad. I couldn’t bear the idea of remaining in our marital home because it was full of too many bad memories and home improvement projects that were started, but (to this day) not finished! I felt more confident in my ability to go out and find a decent new place to live on my own than I did for my ex to do the same on his lower income. I decided it would be better for the kids to have one environment remain the same and do my best to establish a new home of my own.
While my ex and I were able to split much of what we had pretty equitably, I still had to find beds for both of my kids, a dining table, a washer and dryer, and many other odds and ends to furnish our home. I wanted to be sure they had pleasant bedrooms with the furniture they needed and toys they could look forward to playing with in my home.
I could have probably gone with a smaller home and tried to cut more corners instead of trying to instantly create the perfect home.
It added up! I ended up getting in over my head recreating a kitchen, purchasing all new linens, and bedroom furniture, even though I am a pretty thrifty person who’s not afraid of a DIY project! I ended up maxing out two credit cards to get what I needed and ended up selling what was left of my jewelry and the TV to a pawn shop at one point just to make rent.
Although we weren’t living extravagantly, I could have probably gone with a smaller home and tried to cut more corners instead of trying to instantly create the perfect home. I also could have sold my items for more money by using a reputable service that could get me top dollar for my valuables.
Ask lots of questions about things you don’t understand!
I don’t speak bank lingo. I really thought that something like having my name removed off of the deed to a house was as simple as including that in our divorce, then expecting that it would happen within the designated amount of time. Wrong! I should have asked for explicit details of how this would work to protect myself. Instead, because my lawyer never voiced any concerns, I let this issue slide with the expectation that “within 30 months of the divorce judgment” he would ensure that I was no longer liable.
Things got sticky when he lost his job six months after our divorce, and still didn’t have a job at the 30-month mark. By 18 months in, I was starting to become terrified that the house would go into foreclosure, and I would be left holding the bag for a house I didn’t even live in! You see, the only way to remove my name from the deed was either for him to refinance in his name (impossible without an income!) or find a co-signer (which he had been unable to do).
I ended up hiring a lawyer to file for contempt of court because he had failed to take care of this issue within the allotted amount of time. We ended up not having the hearing because, at the last minute, he found a co-signer. He likely would have been ordered to sell the house and possibly faced fines or jail time, had he not corrected this problem. What a relief it was to unchain myself from that ticking time bomb!
Be prepared for surprises in the future!
Remember, you were once married to your ex, and most likely listed as a contact, if not a co-debtor on loans and accounts. Even if you agreed not to take certain property with you after the divorce (e.g. a car), and your ex agrees to continue to make the payments, you could be in for calls from creditors, subpoenas, garnishments, and other headaches years after the divorce!
Six years since my separation from my ex, and I still get phone calls about his student loan and other debts. Fortunately, I’m not a co-debtor to these issues; but, as his spouse at the time he entered into some of these arrangements, they defer to me when they can’t reach him. I simply forward their phone messages to him and ask him to see that they stop calling me.
I received quite a shock with my tax refund this year when approximately two-thirds was held because of a past debt my husband had with his ex-wife from several years ago! While they were married, she used large sums of money from their household expenses to fund multiple gym memberships, vacations (by herself or with friends), and so on.
Do your homework, ask questions, review everything carefully, do the math, get everything in writing, and stick to the plan you make.
Her spending sprees left the family without enough money to pay their bills, resulting in utility disconnection and the repossession of a car. Fast forward seven years and the dealership had discharged the debt, unbeknownst to my husband, which counted as income against what we expected from our refund! The ghosts of his ex’s spending habits have continued to haunt us through calls and letters from creditors and lawyers years since the events, and even a couple of court appearances!
My advice is to do your homework, ask questions, review everything carefully, do the math, get everything in writing, don’t be afraid to re-visit issues in the future (in court, if need be) to protect your interests, and stick to the plan you make. It sounds like a lot of work, but your future stability depends on your ability to make wise decisions today!
We can’t always see every disaster before it hits; but, we can be educated about the likely hazards, keep an eye on matters as they develop, and seek help for when things become more involved than we know how to handle. Be aware of how your status on accounts and debts may affect you in the future so that you can be proactive in taking steps to keep your record accurate, and your head above water!
About the Author
Audrey Cade is the author of “Divorce Matters: help for hurting hearts and why divorce is sometimes the best decision” (on Amazon) and the matriarch of a blended family of eight. She is an experienced “divorce warrior” in the areas of co-parenting, step parenting, parental alienation, and re-marriage, and enjoys sharing these experiences with others who are also committed to raising happy and healthy kids. Audrey’s professional experience is as a case manager social worker with the developmentally disabled, families with young children, and homeless populations. She holds degrees in Early Childhood Education, Human Service & Management, and a Master’s in Psychology. She enjoys family outings, a variety of arts and crafts, cooking, gardening, and writing. She is a featured blogger for Divorced Moms, has work regularly appearing on Divorce Force, and articles appearing in Step Mom Magazine, The Good Men Project, and others.