Divorce is often devastating, but there are a few financial silver linings.
From the cost of the lawyer to the loss of a spouse’s income, divorce often comes at a high price. What’s more, spouses may walk away from the proceedings with significantly fewer assets and retirement savings. That’s not to mention the emotional toll of the process.
“At the end of the day, divorce is terrible,” says David Hays, president of Comprehensive Financial Consultants in Bloomington, Indiana.
However, that doesn’t mean the news is all bad. While not a reason to run out and get a divorce, here’s a look at seven financial benefits that could make a sad situation seem a little better.
1. Easier budgeting and greater control over money. The end of a marriage can mean the end of fights over money. There is no more struggle over which categories get priority in the budget; no more evenings spent cajoling or pleading with a spouse to rein in spending. “On the other side of divorce is some freedom,” says Elijah Kovar, a partner with Great Waters Financial in the Richfield suburb of Minneapolis.
Nancy Hetrick, a senior financial advisor with Better Money Decisions in Phoenix, can attest to that. In the six months after her divorce to a spendthrift husband, she accumulated $20,000 in savings, thanks to her ability to set her own budgeting priorities. Meanwhile, her ex racked up tens of thousands in debt over the same period. “Typically, it’s going to be positive for one person, not the other,” she says. 2. Early access to a retirement fund, penalty-free. A divorce is one of the few times a person can pull money out of a retirement account early and not pay an early withdrawal penalty. When an agreement known as a qualified domestic relations order is reached as part of a divorce, it allows for an early withdrawal from the account. This money is exempt from the typical 10 percent penalty assessed to those younger than age 59 1/2, although income tax still needs to be paid if the money is not rolled into an IRA.
Cashing out part of a retirement account can be a risky move, but it gives the newly divorced some options they may not otherwise have. “You can really get someone in a much better cash-flow position,” Hetrick says of the smart use of that money.
Ric Edelman, founder of Edelman Financial Services, cautions people not to be too hasty about withdrawing money from an account. He notes that sometimes, in amicable divorces, people try to split the balance of a retirement fund without a qualified domestic relations order. That can be an expensive mistake. “Don’t make any decisions without the advice of an attorney and a financial planner,” he says.
Think of it as a financial decision, not an emotional one.
3. Potentially better investment returns. Divorce could mean better investment returns, at least for women, says Mela Garber, principal at accounting firm Anchin Block and Anchin in New York City. “Men usually take a more aggressive approach to investments and take more risks,” she says. Her observation is backed up by studies such as a 2017 analysis by Fidelity Investments that found women were less likely to fully invest in equities and earned marginally better gains than men. After a divorce, women have the opportunity to take over their own retirement planning, which could be a financial positive in the long run.
4. More college financial aid for the kids. Divorce can be difficult for children, but there is one place where they come out ahead: college financial aid. The Free Application for Federal Student Aid only requires financial information from the custodial parent rather than both parents. However, child support and alimony received from the non-custodial parent must be included on the FAFSA. “We’ve structured some really creative settlements to minimize the income of one parent,” Hetrick says. Additional financial aid is a little-known benefit of divorce, but one that is significant. 5. Social Security perks for older divorcees. Divorced spouses may be eligible to file for Social Security spousal benefits at retirement. You’re entitled to these benefits if you were married to your spouse for at least 10 years. “The ex doesn’t even know you’re doing it,” Edelman says. “It doesn’t have an impact on the benefits the ex will receive.”
If you were 62 by Jan. 1, 2016, you can file a restricted application for Social Security spousal benefits once you hit full retirement age. No longer allowed for younger workers, this application will allow you to receive half your spouse’s benefit while you defer your own and let it grow until age 70. For married couples, this only works if a person’s spouse has already started his or her benefit. However, for divorced spouses, the rules are different. “When divorced, you don’t have to wait until your ex turns on Social Security,” Kovar says.
6. Opportunity to reset financial priorities. While people are sometimes resentful of lifestyle changes necessitated by divorce, finance experts say the opportunity to rethink priorities and start fresh can be a positive. Even major adjustments, like giving up a family home, can be beneficial in the long run. “Sometimes it’s financially better to have a smaller house or apartment,” Garber says.
7. A better bottom line. As Hetrick discovered, divorce doesn’t have to mean a depleted bank account. Even on a lower income, divorced people can build wealth by making smart use of their resources.
The reality is not everyone’s financial situation will improve with divorce, but some people are surprised to learn that it does. “One [client] said, I don’t know why I have so much money now,” Hays says.
Starting over at any point in your life can be daunting, but doing it after 60 is a whole new ball game.
For most over-60s, the two biggest points of change later in life come from financial difficulties or divorce.
More and more baby boomers are finding themselves struggling to meet the cost of living, which is causing them to have to either start over or do a major re-vamp on their finances.
On the other hand is the huge amount of boomers heading into divorce. This change can be incredibly difficult, but it also has a silver lining.
While there can be lots of tricky things to navigate through with both these issues, there are also plenty of advantages to starting fresh later in life.
Before you start thinking it’s all doom and gloom, take the time to reconsider things with these ideas in mind.
Financially strapped
There are so many stories out there about people who have lost everything later in life and are forced to start over financially at a time they thought they’d be winding up their working life. Whether you’re struggling with money because of lack of income, a bad investment, or circumstances completely out of your control, there are ways you can help yourself get out of the downward spiral.
First, make a budget. It’s so much easier to sort through things and get ahead once you know exactly what you’re dealing with. Figure out where you need to cut back and where you can cut back. Look into what your paying for bills every month and shop around. Can you get a better deal on your phone and internet? Probably. Can you find ways to cut down your electricity costs? Definitely. Many companies, electricity included, offer discounts for people who pay online and pay on time. If your bank is charging you account fees just to house your money, go in and ask them for something better. Nine times out of 10, they’d rather cut a deal than lose you as a customer.
Second, take stock of your skills. If you find you need to start bringing in income again figure out how you can do this without stretching yourself too thin. Perhaps you’ll need to brush up on some of your skills thanks to new technology or changes in the industry, but there are plenty of places online you can do this for free. Do you know a language? Can you sew? Have you got admin experience or customer service skills? Whatever your talents are, there is a way to make money out of them — and it doesn’t necessarily mean you have to slog it out on your feet eight hours a day, five days a week.
Suddenly single
On the other side of the fence is the reality more and more baby boomers are facing these days: divorce at 60. Such a huge life change is difficult for many people to deal with, but it’s important to know there’s a light at the end of the tunnel. The first step for many is taking stock of your life. You’ve lost something, yes, but you’ve gained a whole lot, too.
Being single at this time in your life can be liberating and for many people it turns out to be a blessing in disguise. A life that was once full of routine and repetition is now open to all kinds of opportunities.
Get your affairs in order to begin with. With divorce comes financial change, so take the time and care to make sure you have a stable income or plan to sustain you (see above).
Surround yourself with the ones you love. Now is the time to lean on your closest friends and family. It’s easy to slip into sadness at a time like this, but ensuring you’ve got someone nearby to catch up with and talk to is a great little safety net to keep you sane and happy. Hey, if you don’t feel like being around anyone else try doing something that makes you happy. Whether that’s baking, watching old movies, crafting or going for a nice long walk, do the things that make you feel great.
Try something new, too. The best way to shake things up and get out of a funk is to do something totally different. Take a trip somewhere new — near or far — and explore a everything you can there, take dance lessons — experts say it’s the best exercise you can do for your health and happiness — and shake your booty till the cows come home, or do something you’ve been putting off for years. Mixing it up and adding a little variety is a great way to get started. Source: https://startsat60.com/lifestyle/starting-over-in-your-60s
For most people, nothing in their life will be as expensive as their divorce.
Divorce is one of the most life-altering experiences to go through. It not only changes our relationship dynamics, but in most cases, it completely alters our lifestyle. No matter how hard we've worked to live the life we've dreamed of, more often than not, divorces are financially devastating. Many people lose half or more of everything they've saved over the course of their life. This includes their home, their savings, their retirement, business and other investments. If that isn't painful enough, divorcing people often see their income wither and their expenses explode. We cannot forget to factor in the outrageous expenses for attorney fees on both sides, with the higher earning partner often having to pay for half or more of the lower earning partner's fees. No doubt about it, divorce is usually bad news financially. Having said this, all is not lost. There is much we can to do improve our financial situation significantly post-divorce. 1. Try not to waste energy panicking.
Obviously, this is much easier said than done. Nonetheless, we must be diligent in making sure every ounce of our available energy is focused toward saving and rebuilding our finances wherever we can. Worry wastes the valuable time and energy we need, and it keeps our minds too jumbled to find reasonable solutions. As powerless as we may feel, we are never powerless. Where there is the will, and a little creativity, there is a way. After a divorce, we have a multitude of choices to explore, so as bad as things may seem, we will certainly not end up on the streets. We must do all we can to shift our focus onto solutions and away from problems. This mental shift puts us into a proactive mindset, which has the immediate impact of changing our mood to hopeful. 2. Take inventory. Because divorces are so twisting and confusing, it may be difficult to understand how or what is going to happen with our finances and investments. Remember that knowledge is power. We must do our research and gather the information necessary to know how to rebuild. It is helpful to create spreadsheets, making a separate sheet for our varying incomes, another for our expenses and another for assets and liabilities. On each sheet enter the type of account, who owns it, what the rate is and the contact information for each institution. As we gain more information through the divorce process, we become clear on where and how things are going to land. This gives us a better idea on the areas where we need to stay conservative, and the areas where we can afford to take some calculated risks to start rebuilding. It's astonishing how empowering it is to have one place to go when we feel stressed and need an overview of our finances. Our spreadsheets provide us exactly that. 3. Balance your budget. After a divorce it will undoubtedly take some time to adjust to the income/expense story of our new life. This isn't fun, but feeling resentful doesn't bring any less stress and nor does it bring us more freedom. We must accept what is and work with what we have. If we feel unclear on the average amount we can spend, we should be more conservative and start keeping track until things become clear. This is the most important piece of financial information we have. With it, we'll know if we need to cut back and take on a heavier load at work to increase our income, or if our situation is stable enough where we can live within the means of what we currently have and still rebuild. If we figure out that our spending exceeds our income, this situation is dire and must change immediately. We are better off knowing this information than pretending it doesn't exist and driving ourselves into an even deeper level of financial ruin. 4. Set up accounts correctly. Resetting our lives in an organized and simple way can be confusing while we're traversing a divorce. It is important to count on our legal representatives to advise us on how to take over the title of our accounts, and also who the beneficiaries on our accounts should be. This topic is especially important when it comes to dealing with retirement accounts. We must learn and familiarize ourselves with the rules on this, but we must also be mindful not to act as our own attorney. Good legal advice is key when it comes to the proper vesting and naming our beneficiaries. All these steps are what help to bring us back to a sense of normalcy, security and balance in our life. 5. Organize priorities. The realities that come with divorce include huge doses of emotional shock and disbelief. When we're divorcing it can feel as if everything is coming at us all at once, which causes us tremendous anxiety. When we are full of anxiety we start thinking in terms of dooms day. This type of thinking is highly dangerous because it leads us into emotional shutdown. If we determine that we don't have enough money to survive month to month, then first priority will need to be our budget. If need be, we must seek a financial advisor who will help us to save and grow our income. If money isn't our issue, we must turn our focus on increasing our finances, moving and creating our new life. 6. Pick your supports. Divorce separates our friends and family just as it divides the marriage. It is vital to pick the people who support us unconditionally, and who we know will have our back no matter what. Part of the pain of divorce is that we not only lose a marriage, but we also lose many of the friends that were made during the course of the marriage. If our ex is talking poorly about us to everyone we love and care for, we must do all we can to stay quiet and not fuel that fire. Those who are true to us will not believe everything they hear, and nor will they put us in a position to have to defend ourselves or our decision- making. It can also be important to get into some form of therapy, or a divorce support group, especially if we have children who have been placed in the middle. Our community of support is what keeps us resilient. 7. Learn By taking inventory, balancing our finances, organizing our priorities and establishing our supports, it helps to keep us moving forward even when we feel as if we don't have the energy. It is hard not to let the stress of a divorce kill our motivation and faith in people. However, the more proactive we are, the more we learn, reflect and take care of ourselves the healthier we are when going through the divorce and the more easily we move on after the divorce. We must put all of our energy into not letting our divorce cause us to lose direction. We must force ourselves to focus on staying on task and moving in a new and positive direction. Our happiness and continued success, at the end of the day, becomes our greatest retribution. Source: https://www.entrepreneur.com/article/307592
Finances: What to Do when Finances after Divorce Stress Your Children
Joi Freemont, a dentist in Atlanta, Georgia understands how tough divorce-related financial problems can be for children. “I frequently see children whose parents are recently divorced. When the breakup happens, the kids are suddenly having their braces removed because neither parent wants to pay for them anymore.” The statistics for divorced families are grim: 27 percent of children living with their mothers and 12 percent of children living with their fathers are in poverty, according to the 2006 Yale University Press book, Divorce: Causes and Consequences, by Alison Clarke-Stewart. “Financial changes that result from a divorce can be as emotionally difficult for children as they are for parents. Even when they are babies, children can feel if their parents are stressed,” cautions Sharon Fried, a clinical psychologist and author of Children are People Too. Dr. Fried advises, “Although children do not need to live in a fantasy world, parents who share details of the family’s financial troubles will be placing unnecessary and troubling burdens on their children. These unnecessary burdens can affect their schoolwork, their socialization, and other critical factors while growing up.” A divorce is often a financial blow to families. Parents discover that two homes mean two of everything: beds, desks, tables, toys, and much more. Younger children who had previously enjoyed weekly trips to the movies might suddenly find themselves confined to the T.V. Older children might be shocked to learn that new video games have become a thing of the past. So how are co-parents to best help their children to adjust to these new limitations? Financial changes need to be explained in an age-appropriate way. Younger children do not have the reasoning abilities of adults and may grossly misinterpret certain statements. Author Linda Leitz of the upcoming book We Need to Talk: Money and Kids After Divorce says, If a mom says to a preschooler, ‘We can’t afford to do what we used to,’ that may sound like ‘We’re going to have to live on the street,’ instead of ‘You need to choose between ballet and soccer.’ So with all kids, it’s good to stress that they’ll be ok even though some changes will be on the horizon.” One of the most common and jarring changes for a child is moving homes. Children are forced to deal with new bedrooms, neighborhoods, schools and friends. Author Jenn Hollowell morosely remembers that her “room went from being on a sun porch to being in the basement because there wasn’t enough room for me.” Joshua Forman, matrimonial and family law attorney at the New York firm Chemtob Moss Forman & Talbert LLP says “financial difficulties must be carefully explained and not blaming the other parent will help the child understand the new realities of life.”
Although children should be protected from adult decisions and problems, honesty is sometimes the way to go. Brette Sember, author of The Divorce Organizer & Planner, recommends parents tell children that while there might be fewer funds available, you as a family are going to be creative about how you deal with it and that you will all support each other and focus on the things that are really important, your relationships together. “Parents who are overwhelmed by financial-related problems stemming from divorce may consider outside or professional help. It is imperative that a parent seeks emotional support during times of high stress and trauma,” says licensed professional counselor Diane Cantrell. “Emotional support can come from family, friends, clergy, the family physician, and mental health professionals. Many agencies offer counseling on a sliding scale and provide divorce recovery groups.” “In a silver lining mode of thinking,” says Linda Leitz, “there may be positives that come from financial changes. Appreciating the time kids and parents share is so much more important than what the parents buy them. Whether kids spend equal amounts of time with each parent or have a primary and secondary parent relationship, the parents can focus on having their time together meaningful.” Leitz recommends finding low-cost activities such as reading and cooking family meals together. In the end, parents must do their utmost to ensure a child understands that they are protected, safe, and that money isn’t everything. “During a time of great transition like a divorce,” says Tammy Gold, founder of Gold Parent Coaching, “a good lesson is that no matter what changes in life, Mom and Dad’s love will never change.” Source: https://www.wevorce.com/blog/cash-problems-stress-the-kids/
