When thinking of your financial future you probably think of money coming in, investments made, even home ownership. Rarely do people think of their marriage.
Marriage is a great institution, but sometimes your life situation will change but the people in the marriage do not change – or they do, but not for the better. Unfortunately, this is when people begin thinking divorce.
How does a divorce affect your financial future?
Well, that all depends on your financial situation. If you have no children and no assets a divorce is as simple as contacting two attorneys and filing in court. For less than $500, wham bam thank you ma’am, you are divorced.
For most people its not that simple. Or remotely inexpensive.
Love is grand, divorce is Twenty-Grand. That’s right, the average THRIFTY divorce costs $20,000, and this is just the immediate cost. The government spends and average of $30,000 for every divorce. Public assistance programs (like food stamps and subsidized housing) are largely affected by divorce. All in all, it depends on what is going on with your life. Many attorneys will quote an average in the 40 and 50 thousand dollar range.
What are some of the areas effected?
1. Income Obviously your income (as a household) will change. If you were a 1 income family, both spouses will most likely need to work. Even if you are a two income family, living expenses will increase. Even with child support or alimony your entire life and budget will be changing.
2. Housing I know some people that continue to live together after they are divorced, but honestly I can’t imagine enjoying that. If you have a home that both partners own, it will likely need to be sold. Many times, homes in these situations are sold for less than their value just to have them sell quickly. Even if the home sells quickly and for a profit, quite often you will see a housing downgrade and move from that nice 4 bedroom to a 2 bedroom apartment and taking laundry down to the corner.
3. Taxes I am not going to go into the tax implications, but trust me they are complicated. 401Ks and IRAs may need to be divided, or heaven forbid cashed out. Taxes and penalties can take away large portions of your retirement. Its best to speak with a CPA so you can lose the least amount of money.
4. Your credit score One nice advantage in a marriage is that you can boost each other’s credit scores. With a divorce, you could see yours drop. If joint assets, like a home, is given to one partner, it can still affect the other partner. You might find out, you can’t get a car loan because your debt ratio is too high. If the partner keeping the house, can’t keep up on payments and get behind on payments it can effect you as well.
5. Wills and Insurance If you are divorced you will most likely want to change your beneficiaries. Even if you keep your beneficiaries, additional term life insurace might be a good idea. If I got a divorce and died, who would take care of my children? Whether or not you get custody of the kids, this is something you should consider.
Have you tried marriage counseling?
All in all, if you are in tough times with your marriage, you might want to consider your options. Marriage counselors cost about $100/session and will see you once a week for three months. For $1200 you could save your marriage. Family counseling does tend to work faster than individual counseling, which will boil down to less cost for you. Even if you were in marriage counseling for two years, it would only cost $10,000 dollars or half the price of a thrifty divorce. There are also other added benefits of a marriage staying together.
If you are in hard economic times yourself, look to your local church or synagogue. Many religious organizations offer free counseling, and there may be local groups that offer sliding scale fees. That means, if your marriage is on the rocks because you lsot your job, you can still get help. Also look into support groups. They tend to be low cost or free and can help you get friendship and support outside of your weekly couseling session.