Those considering divorce tend to focus primarily on the emotional issues that have led to their unhappiness. Most people in this position hope they can make this critical decision without regard to the financial implications. Such concentration on what has led to the dis-satisfaction is admirable but may actually hinder them from choosing a path that would result in their most positive outcome. To put it bluntly, sometimes it is easier to mend a relationship that was once strong than it is handle the financial difficulties that arise from divorce. If you are considering getting a divorce because you are unhappy with your current situation, you need to seriously consider how your situation will be after the divorce. It’s the old saying: “Look before you leap.”
Before buying a home, most of us consider how the purchase will affect us in the short term and long term. One short-term consideration would be how we will come up with the required down payment. Thinking longer term, we calculate the savings we will achieve by deducting our interest payments. We consider how much the home might appreciate over the long term. We plan for the types of repairs we might need to make as the home ages.
People generally have beliefs about the financial impact of divorce based on popular notions, which are often inaccurate. Because they are afraid that their spouse would consider contact with a divorce attorney as a sign that divorce is inevitable, most people wait to make contact until divorce really is almost inevitable. It would be better if people considering divorce talked to an attorney earlier in the decision-making process. This way, as they consider divorce, just as when they make less critical decisions, such as whether to buy a house, they would know what the actual financial impact would be. The bulk of the people we see in our law practice do things in re-verse. They come to us ready to begin a divorce without having seriously considered the, often life-long, financial implications.
Divorce is tightly connected with finances. In fact, some believe that one cause of the increase in the divorce rate in the 1970s was an increase in married women entering the workplace. Their increased financial independence may have contributed to their willingness to leave their husbands. The changing status of women has continued to shift the financial landscape of divorce. With rights that were more equal came more equal responsibilities; today, while still rare, there are women paying alimony to men.
Negotiations over finances are often the most contentious aspect of divorce. A lot of the conflict arises from the lack of funds that most middle-class couples will experience following divorce. Conflict over finances can be amplified by the emotions divorce stirs up. Often, a spouse who doesn’t want the divorce will use financial negotiations as a way to get even with the initiator. This is rarely productive but sometimes does result in an agreement based on the guilt of the initiator. Such agreements are tenuous because the guilt the initiator feels at the time of divorce eventually dissipates, which may lead him or her to reopen the fight.
Most middle-class families spend about as much as they earn, and often a little more. When these families experience divorce, their expenses rise because they must maintain two households. One person leaving a household does little to offset the expense of a new house-hold, because expenses such as mortgage are independent of the number of people in the house. Even though the spouse who is leaving may move into an inexpensive apartment, the second household generally costs at least 40 percent as much as the first.
When you consider the additional expenses incurred by maintaining a second household, it is quite clear that divorce creates a financial hardship. It is common for couples, at the request of their lawyers, to create monthly budgets for their new lives and then to be surprised when their expenses greatly exceed their income. It is perfectly natural for everybody to want to keep the standard of living they had prior to the breakup. In general, men wind up faring better financially in divorce than women. The most commonly cited statistics indicate that, on average, men raise their standard of living by 10 percent while women experience a decline of 27 percent. While we won’t argue with the statistics, our experience is that this gap is narrowing and that it’s rare for either party to come out a financial winner in divorce.
Since divorce results in increased expenses, those with an already-tight budget need to seriously consider how they will adjust their finances to make ends meet post-divorce. Usually a mix of expense reduction and additional income is required, both of which generally mean painful choices and changes. Expense reduction is sometimes achieved by selling the family home, trading in cars for less expensive models, changing shopping and dining habits, or eliminating private school or summer camp.
Income is typically increased as a parent who has not been working, or has been working part time, returns to full employment. When children are involved, this scenario can create new problems, because the stay-at-home parent may need to be replaced with an-other caregiver while he or she works. Another, longer term, income-enhancement strategy involves one spouse increasing skills through college or other training. When considered carefully, such training can pay for itself rather quickly, but it is likely to create a short-term financial and time burden. Making plans for career changes or enhancements is difficult when one is going through a divorce, but it may be necessary in order to create a financial plan that meets the goals of both spouses.
Planning budgets that work over the long term is an important part of the divorce process, but the short-term costs of divorce also need to be considered. The costs involved in a noncontentious divorce in which lawyers handle negotiations will usually range be-tween $5,000 and $30,000, depending on where you live and the lawyers you each choose. While you don’t pay directly for your spouse’s attorney, you do pay indirectly, as the assets or debts you will divide are affected.
