What's Your Post-Divorce Financial Plan?
What's Your Post-Divorce Financial Plan?
I can remember exactly where I was and what I was doing when I first realized that one could keep a rational mind while facing divorce.
It was a beautiful early Saturday morning and I was at the ocean, preparing for a morning workout with my trainer. I was single, in my early 30's and didn't then know that divorce would ever personally touch my life.
I pulled my car along the curb over looking the beach in Santa Monica and turned off the engine, but kept the talk radio show on as I waited for my trainer to arrive. The host was advising a woman on the steps she should take before asking her husband for a divorce.
This woman was clearly suffering from a betrayal by her husband. What's more, she had young children and scarce resources. The host told her to stay calm, buy some new clothes, get her resume in shape, save some money and pay off debt.
I was mesmerized. How could this woman be expected to stay calm and rational when she just discovered her husband was planning to leave her for another woman!?
It was at that moment that I really understood there are times we have to rise above emotion and dig deep into self preservation and care. This is especially true if you have children and/or few work skills.
In other words, divorce is no time to be emotional.
If that sounds insensitive, I'm sorry. Of course it's an emotional time and things will never be the same — but parts of your life will improve. I promise.
Designing a strong and clear strategy will make a big difference in your new life. Also, doing so will keep you busy while time works its healing force on your wounds.
To devise a financial strategy, the first step is to take a thorough financial inventory. You need to know what you have, what you spend and what you earn:
What you have: The amount you currently possess is found on your balance sheet, which is a list of assets minus liabilities. To draft a balance sheet, write down how much you have in savings, the value of your house and major furniture, then subtract what you owe on your mortgage and credit cards.
This number will help you figure out what kind of settlement you need. Many women face a choice between receiving a lump sum of cash or keeping the house. Often, women want to keep the house, either so they can raise their children there, or simply to avoid needing to find another place to live. Once you draw up a balance sheet, you'll be able to decide whether it makes more sense to ask for a cash settlement or the home.
What you earn: Your earnings are the income you and your spouse receive. You need to realize that if he earns significantly more than you do, you're going to have to change your lifestyle. The sooner you accept that, the better. If you're not working this is a good time to think about what you could earn if you went back to work.
Don't be discouraged. I've personally witnessed many women out earn their husbands within three years of the divorce. You are a powerful group of women and can accomplish amazing things once you set your sights on something.
What you spend: I tell all my clients they need to know how much they spend each month. If you can fully understand what it takes to run your life, you can begin to find a way to maintain your lifestyle after your divorce.
Estimate everything you spend each month for an entire year, taking into account holidays and vacations. Many people tend to underestimate their spending so I usually advise clients to add another 10- to 20 percent to their preliminary total to arrive at a realistic annual figure. Divide that number by 12 to figure out what you'll need in earnings and alimony to maintain your lifestyle. If this number is not feasible then figure out what you can afford in rent and other expenses.
Doing this exercise can be an eye opener about how expensive life really is. But you need to remember you can obtain what you need. Say to yourself, "I can create this income through my own efforts." Remind yourself that you will devise a plan to accomplish this goal — and that the journey will be fun. Remember, right here, right now you are ok. You can do this one day at a time.
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