Financial Barriers to Divorce Spouses Face and How to Overcome Them
Divorce is far more than a complex emotional decision
People often look at divorce as a complex emotional choice. While that is true, the practical and financial aspects of the divorce can be far more complicated.
Musician Gene Simmons once said, "The biggest financial pitfall in life is divorce."
It does not have to be that way. Let's look at the financial barriers in divorce and how spouses can overcome them.
Untying the knot is a complex affair
Maria Shriver petitioned to end her marriage to Arnold Schwarzenegger in 2011.
A judge finalized their divorce in 2021 after ten years and a multi-million-dollar price tag.
Today, both parties continue to live lavishly and co-parent amicably.
Most divorcing spouses cannot financially survive a divorce that lasts or costs a fraction of the Schwarzenegger-Shriver debacle.
That is why some spouses put off divorce or avoid it altogether
When they evaluate the financial consequences, a paralysis may set in and keep them in an unhappy marriage.
But for those who do not want to be in an unhappy marriage, financial barriers need not get in the way and a divorce settlement can allow both spouses to move forward with their lives.
In this article, we discuss common financial barriers spouses face to divorce and how to overcome them.
Managing the new reality
Divorce affects a household budget due to new expenses and responsibilities. It is well known and accepted that two households are more expensive to operate than one.
Most people need to increase their income (or intake of money) by around 30% to maintain their standard of living after divorce. That is why it is sometimes said that maintaining the marital standard of living after a divorce is not practical.
Different states have different rules regarding spousal support, which is also called alimony.
In California, it is common for the higher earning spouse to pay spousal support to the homemaker or lower earning spouse. Higher earning spouses in long term marriages fear paying spousal support for a long time (or indefinitely).
Lower earning spouses fear the opposite
In short marriages, the battle sometimes becomes whether spousal support can be avoided altogether.
This is why some spouses delay divorce or decide not to file.
When they learn how much spousal support they may pay or receive, they may prioritize concerns about that number or duration over nearly everything else.
This is especially true in middle income and upper middle-income households where the family lives paycheck to paycheck or beyond their means.
Spouses have the same concerns regarding child support. And since child support is sometimes tied to parenting time (California child support laws being one example), there is the added fear of whether the children will be used as leverage in the divorce.
Dividing property (assets) can also be complicated and sometimes contentious. Division of assets and debts directly affects financial stability, especially in longer marriages.
Some states like California are community property states. Dividing property in California may differ completely from a non-community property State and therefore spouses in one state versus another may undergo different financial benefits or hardships.
The average litigated divorce costs between $15,000 to $30,000.
This total could include attorney's fees, court costs, expert costs and other costs. The more complicated or contentious the divorce, the higher the fees and costs.
Even in modest financial estates, divorce can become expensive especially if there are custody battles and one parent seeks full custody of the child or children.
The average American pays $542 monthly for a health insurance premium and $138 monthly for full coverage car insurance.
For a stay-at-home parent, returning to the workforce could pile on childcare, transportation, and wardrobe costs.
Women face unique financial challenges
CNBC reported that a "significantly large number of women" remain in unhealthy marriages for financial security.
Marital financial perks include filing joint tax returns and group health insurance.
Generally, women experience more financial stress than men.
A 2019 nationwide survey found that 51% of working American women face financial stress compared to 41% of men.
Ongoing discrimination against women includes the gender wage gap.
On average, employers pay women an annual salary that is a third of what they pay men.
Lower salaries affect a woman's ability to save money and invest. For example, 34% of women deplete their money before payday compared to 35% of men.
These financial conditions push many women to rely on expensive credit cards, payday loans, and other high-risk payment methods.
The survey also found that women face higher debt rates and are more likely to be denied a loan by a bank than men.
How to financially prepare for a divorce and mitigate the harm
Take a financial inventory of the marital estate
A spouse should prepare for a divorce by taking a financial inventory of the marital estate. That includes all the assets, debts and liabilities. If it touches the divorce case, it should be part of the inventory.
Track income and expenses
What is the monthly and annual income? What are the monthly and annual expenses? Running a marriage is like running a business. You need to know the credits (money in) and debits (money out) to operate it.
Learn what to expect in your divorce through effective legal representation
There is no substitute for or shortcuts to experienced and intelligent legal representation.
A divorce attorney experienced in both settlement and litigation of divorces should be able to tell you what to expect in your divorce.
Effective divorce attorneys do not take cookie-cutter approaches to divorces.
They tailor their advice and strategy to their client's specific situation. And since each State has their own individual divorce laws, you will need proper legal advice to understand how the law affects your specific facts and circumstances.
Ask whether you should delay or alter major financial decisions
A divorce is a game changer. It is not life-as-usual. If you were thinking about major financial choices before the divorce, you should reassess those choices to determine if the divorce changes your path.
Budget for those expectations
Once you have a financial inventory of assets and debts, have tracked income and expenses and know what to expect, you can budget.
There are a lot of programs out there that help you budget income and expenses.
As one of many examples, Mint is a free online budget planner that allows users to track their spending, credit score, and budget.
Keep emotions in check
The less a divorcing couple involves the courts, the more money they could save in legal fees and costs. You should not let your emotions take over the decision-making process.
Ultimately, if spouses cannot come to an agreement, the courts will decide how much support to award and how to divide assets and debts. And looking back, the question you may ask yourself was whether pouring that money toward litigation was worth it.
Know your options if your spouse is high conflict or finally abusive
Organizing a financial inventory is more difficult for a spouse in a financially abusive marriage.
Financial abuse is a form of domestic violence where the abusive spouse controls a victim's access to financial resources.
Typical forms of financial abuse include preventing someone from working, forcing someone into debt, or limiting someone's access to bank accounts.
Netflix's Maid portrays the obstacles a young mother, Alex, faces as the victim of financial and emotional abuse. Netflix based the fictional series on Stephanie Land's true story.
Viewers watch as Alex faces financial barriers, including homelessness, job insecurity, attorney's fees, and childcare costs.
Work with a financial professional
A certified financial planner could help a divorcing spouse establish financial independence through budgeting, opening bank accounts, and securing money for divorce-related costs.
Many certified financial planners, or CFPs, provide free professional advice for underserved or at-risk communities.
Someone from these communities, such as veterans, domestic violence survivors, and low-income families, could access free financial services through these organizations:
- The National Association of Personal Financial Advisors
- The Association for Financial Counseling & Planning Education
- Financial Planning Association
- Foundation for Financial Planning
- National Foundation for Credit Counseling
A qualified CFP helps clients achieve their financial goals and learn financial topics like investments, insurance plans, and taxes.
For instance, a CFP could help clients cope with inflation by optimizing their cash flow through savings and strategic bill payments.
Working with a CFP could empower a divorcing spouse to manage their finances efficiently and autonomously.
Are there nonprofits that can help?
Nonprofits nationwide serve the needs of divorcing spouses.
Someone needing domestic violence support can search through the National Domestic Violence Hotline directory for domestic violence organizations.
A domestic violence advocate could help a financial abuse victim safety plan by gathering much financial information.
Financial education nonprofits like Savvy Ladies provide free services to women of all backgrounds.
Workforce development nonprofits such as Path Forward assist adults in returning to the job market after an extended period of caregiving.
You can overcome the financial barriers
Every adversity is an opportunity. Divorce is no different. The financial barriers in front of you are those you can put behind you through effective planning and a logical approach to the challenges ahead.
We hope you enjoyed this article.
Like all of our articles, nothing contained herein is legal or other advice.