Regardless of the terms of any ‘money settlement’ associated with a divorce, the dissolution of a marriage has financial implications that can impact the rest of your life.
A study conducted by researchers at Ohio State University found that getting a divorce decreases a person’s wealth by about 77% compared to that of a single person.
“Divorce causes a decrease in wealth that is larger than just splitting a couple’s assets in half,” said Jay Zagorsky, author of the study and a research scientist at Ohio State University’s Center for Human Resource Research
BE.com spoke with Stan Corey, author of The Divorce Dance: Protect Your Money, Manage Your Emotions, and Understand the Legal Issues, about how to manage this difficult transition. Corey says there are three main issues people getting a divorce must consider:
- The first thing you must ask yourself is will the financial settlement allow me to be secure now and in the future? Attorneys are often negotiating on the client’s behalf and then ask the client if they can live with the results. Unfortunately, most people going through the divorce process have no idea of how to evaluate the settlement regarding their long-term financial wellness. Just remember, your marriage may not have lasted forever, but your divorce property settlement will. Be sure to understand what it means for your long-term financial security before you sign.
- You must also understand the tax implications of the division of property. Just because the values are the same, the real net value may be very different due to income taxes and expenses. Retaining the home and giving up the retirement account may not be in your best interest. There is no cost to maintain the retirement account while the house has a mortgage and lots of maintenance expenses.
- How much financial and emotional currency are you willing to spend? Many times, the emotional aspects of a divorce process can cause one to be unable to make good decisions that will affect the financial settlement.
In addition to Corey’s tips, be sure to get the counsel of a financial professional so that you can realistically assess what your living expenses will be in your new life.