Dealing With the Financial Aspects of Divorce
Gabrielle Hartley, a divorce mediator and lawyer and author of the book Better Apart: The Radically Positive Way to Separate, explains that there's more than just finances involved when a woman divorces. In her 25 years of experience, she has found that "many women, even those who are highly educated, have very little understanding about personal finance or family finances." Once a woman is faced with this fact after the divorce, it's normal to feel shame and anxiety over their lack of knowledge.
Two Important Steps to Handle Your Finances
Hartley advices divorcees go through a two-step process. The first is to "give yourself permission to forgive yourself for all the financial decisions and choices you made or failed to make during your marriage." The second is to determine where you are financially. You can do this by filling "out a financial form where you take stock of your assets, debts, income and expenses." You can use this balance to sheet to "move you powerfully forward through and beyond your divorce." It's also important to establish a budget for the future, and if you have children, involve them in the process so they understand why expenses may need to be curtailed in order to build a new life together.
Make Use of Financial Education Online Resources
Hartley advises women to consider working with a Certified Divorce Financial Planner. In addition, there are many resources online for divorced women:
- If you don't know where to start when it comes to organizing and making the payments a divorce finances spreadsheet can help you get on the right track.
- Use a free online site to help you review your finances, create a budget and check your progress such as Mint.com
- Savvy Ladies is a non-profit organization offering free financial education for women including webinars and a free financial helpline.
- The Women's Institute for Financial Education offers free "Second Saturday" Divorce Workshops nationally. The workshops provide financial education as well as legal information and peer support. The WIFE website also has a wealth of financial information for women.
Speak To Your Spouse's Planner
Although many women won't think to do this, divorce laywer Russell D. Knight advises them to speak to their ex-spouse's financial advisor. Says Knight, "the financial advisor presumably handled your finances before the divorce and is familiar with your financial situation both before and after the divorce." If the advisor will have actionable financial advice for the ex-husband, then "this applies equally to the ex-wife." Knight has found that financial advisors are "happy to talk with an ex-wife for the possibility of getting a new client, or at the very least, networking."
Understand Your Alimony
If you are set up to receive alimony payments as part of your divorce settlement, it's important that you fully understand the payment schedule. According to Certified Financial Planner Zach Morris, you should know, "is it forever, does it decline after a number of years, does it change if you move in with someone, etc." If you have a good grasp of the payment amounts and schedule, you can use this to "help you plan for the future and if you don't need all of the alimony, you could potentially use some of that income to save toward retirement."
Retirement Considerations for Divorcees
Brad Renfro, PhD, CFP, advices divorcees to think about retirement planning sooner rather than later. "This is especially true if your former spouse had a higher income or better retirement benefits at work, like a larger 401K matching contribution." If the retirement account was split up between the two of you as part of the divorce settlement, you should review your plan "to see if you need to adjust anything" as a new, lower income may mean "you aren't making progress at the same rate anymore."
Online Retirement Information Resources
Women's Institute for a Secure Retirement provides free online information for women to improve their long-term future. MyMoney.Gov is a free site produced by the Federal Financial Literacy and Education Commission. The site provides financial education as well as online tools such as calculators, worksheets and checklists for people rebuilding their finances after a serious life event such as divorce.
Financial Help With Legal Bills
Some states aid with paying court costs through waivers as well as assistance with legal services.
- The American Bar Association provides a state-by-state list of court family services centers which can provide you with information on court fee waivers. If your state is not listed, contact your state's district attorney's office for referrals to services in your state.
- Legal Services Corporation assists low-income individuals with legal information and assistance in their state.
- Stateside Legal assists military members, veterans and their families with low-cost legal aid.
- LawHelp.org provides a directory to local legal aid centers as well as links to social service agencies for low-income individuals.
Job Training and Education Assistance
Many divorced women find themselves having to return to the workplace after an extended absence. Or they may feel the need to strengthen their educational background to find better paying positions to make up for the loss of income.
- Contact your state's Workforce Agency for training and education assistance such as help finding a job, training opportunities and adult education support.
- There are numerous grant and scholarship programs for women looking to return to school. The Student Debt Relief website lists several private and community club scholarship programs for non-traditional students.
- In addition to national programs, contact your local Chamber of Commerce and service clubs (i.e. Rotary Club, Soroptimist) as many offer local scholarships for women.
- Pell Grants are designed for low-income students and single parents seeking to go to college are especially encouraged to apply. The program provides up to $5,920 annually. Another program is the Federal Supplemental Educational Opportunity Grant which provides from $100 up to $4,000 annually.
- Many states offer their own grant and student loan programs for single mothers looking to earn a college degree. Contact your state's financial aid office to see what programs are available.
- The Small Business Administration (SBA) has Women's Business Centers in every state that are dedicated to assisting women who want to start their own business. Many divorced women seek to start small businesses as it may be more lucrative than returning to work and can possibly make child rearing easier if she can negotiate her own schedule.
- There are grants provided for women-owned businesses through SBA, the Minority Business Development Agency and private funding agencies.
The federal government and individual states provide several types of assistance which can assist primarily lower income divorcees with children.
- You may qualify for a housing voucher, also known as Section 8. The Department of Housing and Urban Development has local public housing agencies that can give you information on the application process. Eligibility is based on your income and the median income of the area you live in.
- The Supplemental Nutrition Assistance Program (SNAP) has local offices around the country that provide food stamps for low-income families. There is also a SNAP Benefits Estimator you can use to determine your SNAP benefit which is based on your monthly income and number of household members.
- If you have children under 5, the Women, Infants and Children (WIC) Program can provide benefits fort certain foods such as milk and produce.
- Your children may be eligible for the Children's Health Insurance Program (CHIP). CHIP is designed for families that have incomes that are over Medicaid limits and each state has different requirements. Your state Medicaid office can provide application information.
- If you can use assistance with paying your phone bill, the Lifeline program gives low-income individuals a discount of $9.25 a month. You must have an income equal to or under 135% of the poverty guidelines. There is an online eligibility checker tool for potential applicants.
- The Low Income Home Energy Assistance Program (LIHEAP) provides benefits for the cost of utilities. Eligibility is based on income and a demonstrated need for assistance with your home utility bills.
- Temporary Assistance for Needy Families (TANF) provides small grants for up to 5 years.
Social Security Benefits
"Gray divorce" is an increasing trend with adults 50 years old and above. Between 1990 to 2010, researchers found that the divorce rate doubled and continues to rise. If your divorce occurs when you are 62 or older, and your marriage has lasted at least 10 years, you can get a portion of the social security benefits from your former spouse. If your own benefits based on your personal work history is lower, this may be a better option for you. The benefit amount is half of your ex-spouse's full benefit, and applies to retirement or disability benefits. This applies if you are unmarried and start taking the benefits at age 65 or older.
In addition to online resources and government programs, women can look for services in their own community for divorced women. Your local churches and private social service agencies can be a source of support and resources, as well as friends and family. Contact your local city or county government services office or local helplines, such as through your area's United Way. They can be a source of local non-profits and private charities with programs and services designed to help women and families. Women should also strongly consider working with a financial advisor to help you navigate important concerns such as:
- Securing an insurable interest in an ex-spouse's life insurance to provide for your children;
- The benefit of a pre-nuptial agreement for your children if you remarry;
- Obtaining long term care insurance and other retirement strategies;
- Developing a realistic budget and tackling debt.
Financial Impact of Divorce
Divorce can have serious negative consequences on a woman's financial situation, particularly if there are children and she retains custody. Some sobering statistics about women in divorce include:
- A divorced woman is more likely than not to see her standard of living drop as much as 73%.
- The average amount of child support received is $329 per month and about 30% is partially or never received.
- About 47% of families headed by a divorcee accessed at least one type of public assistance and about one-third of divorced mothers received food stamps.
- The cost of legal fees can average about $3,500 per person, with this amount decreasing if the divorce is amicable and doubling or tripling or more if litigation and significant assets are involved.
These costs, and others outlined above, are just a snippet of why women should be aware of their financial situation before, during, and after divorce.
Secure Your Financial Future
Divorce, even when amicable, is a stressful and unpleasant experience for women that can be compounded by dealing with a serious drop in income. There is help available for divorced women and the more diligent you are about researching them, the stronger your future financial footing will be.