Divorce is a difficult and challenging transition that many people go through. According to the Centers for Disease Control and Prevention’s National Vital Statistics System, 38% of all marriages in 2014 ended in divorce.
While the dissolution of a marriage is hard for men and women, research shows that women fare far worse financially.
“Studies reveal that in the first year after divorce, the wife’s standard of living may drop almost 27%, while the husband’s may increase by as much as 10%,” says Carla Dearing, CEO of SUM180, an online financial planning service created by women for women.
“Additionally, divorced women do not fare well as they age, according to the Social Security Administration, which reveals that 20% of divorced women aged 65 or older live in poverty, compared with 18% of never-married women and 15% of widowed women. Quite simply, to escape becoming a depressing divorce statistic, women need to avoid getting screwed in divorce,” she adds.
In this two-part series, we’re going to look at what Dearing says are common pitfalls women fall into when divorcing, and her tips on how to avoid them.
Pitfall: Letting your emotions determine your path. Money is always emotional, but divorce amplifies this reality many times over. Do not, for example, be overly anxious to get closure. Rushing into a divorce settlement because you “just want to get it over with” can spell the difference between a secure retirement and a strained one.
What to do: Reach out to a trusted friend for advice. A friend or family member with your best interests at heart can lend you the clarity and energy for the next steps you need to tackle. Share a glass of wine, talk, cry, and accept the support you need. If your friend has been through a divorce herself, she may even recommend a great divorce attorney or divorce financial planner. If so, listen up.
Pitfall: Failing to understand your financial picture. Some women get into the habit of letting their spouses handle the family finances, or of compartmentalizing the family finances so that while you may be expert in one area (e.g., your household accounts), you are out of the loop in others (e.g., a family business). You can’t arrive at a fair settlement if you don’t have a clear and comprehensive picture of your financial situation.
What to do: Start getting up to speed on your financial picture right away. First, make sure you have access to all bank and investment account passwords and documents, and your recent tax returns. Check your credit reports for discrepancies. This may feel overwhelming at first. Fortunately, educating yourself about your finances doesn’t have to be something you tackle alone. Once you have gathered all your financial statements, your financial planner can help you organize and interpret this critical data.
Be sure to come back for part 2 of our series and get more of Dearing’s tips, which aim to help women create financial security during this important time in their lives.