Recovering from the Financial Distress of Divorce
DISCLAIMER: The following information is not meant to be legal advice.
It offers alternatives, tips and resources for those with no means to
hire an attorney.
In a typical marital relationship, where one party was the primary breadwinner,
there was usually an unspoken living arrangement and agreement. One party
would be primarily responsible for working at a job to fulfill the present
monetary needs of the family, and also to try and save for retirement
and the future educational needs of the children (if any). The other party
would be primarily responsible for working at home to fulfill all of the
family’s other needs, such as homemaking, being the social coordinator,
overseeing and keeping close track of the children’s daily lives,
and so forth. For lack of a better word, this spouse is often referred
to as the “homemaker” or “out spouse”.
Post-divorce, the homemaker is faced with an entirely new life paradigm
with major financial concerns. There are certain
keys to thriving under this new paradigm.
Leslie Calhoun is a Chief Investment Officer with Optivest.1 She particularly identifies with people who have had to start from scratch
divorce or traumatic event.
Ms. Calhoun states that when a person is faced with such a traumatic change
in life circumstances, “You need to bring yourself back to happiness,
healthiness, and fulfillment with a new targeted lifestyle.”
This involves many key aspects. First is coming to the understanding that
you have now made a break from your former life as a homemaker, and have
started a new one, with new expectations, new goals, new economic realities,
and so forth. A key to happiness and fulfillment is to embrace this new
paradigm, and take “baby steps” to adjust accordingly. Ms.
Calhoun states, you need to create a plan, “to design for yourself
a healthy environment that is not too stressful, and provides an opportunity
to grow and learn more about yourself.” You must come to realize
the reality that, “you don’t get to be a homemaker anymore.”
You must redefine your role in life, your expectations about your life,
your goals, and your plans.
A good starting point is to do a financial assessment of where you are,
and where you realistically want to be in the future. Thus, you should
consider talking to a Wealth Manager about the current support (if any)
that you receive, how reliable that source of funds are, and any other
assets that you received as a result of your divorce. From here you need
to design a plan for moving forward.
This will probably mean living in a significantly down-scaled residence.
This may unfortunately mean going from a 2,700 sq. foot single family
home, to a town home, mobile home (some of which can be surprisingly nice),
or apartment with linoleum floors rather than hardwood and tile. This
is because you previously shared a residence with your former spouse,
and now each of you is forced to have your own residence. Thus, there
is less money to go around. Therefore you need to work on acquiring a
residence that is appropriate for your budget rather than attempting to
live above your means.
Secondly, you and your wealth manager may determine that you will need
to get back into the workforce to supplement your income. This is something
that should be discussed with your attorney prior to finalizing your divorce.
Under appropriate circumstances, the court may make provisions for you
to make it easier for you to spend a year or so to get job training. In
alternative, you may need to make plans to live frugally and dip into
your savings while you obtain such training. Once you complete your training,
you will be able to enter the job market at a higher income, and have
much better opportunities for subsequent job and income growth. You should
discuss with your Wealth Advisor, what kind of supplemental income you
may need to obtain through employment to provide for your living expenses
Another key concern is empowerment and independence. You do not want your
life to be dependent upon the success of your ex-spouse. You want to make
a plan so that when support eventually ceases (which could occur unexpectedly
due to an accident or layoff), that you will still be able to support
yourself and provide for your retirement.
2 is a specialist in Long Term Care Insurance and also Life Insurance. He
recommends that people dependent upon support consider these insurances
to protect their wealth.
The court may order your spouse to provide you with life insurance under
certain circumstances. Regardless, even if the court is not willing to
do that, you can always budget to purchase your own life insurance in
the event your ex-spouse died. Mr. Levine states that Life Insurance and
Long Term Care can also be used as negotiating tools in coming up with
a support package with your ex-spouse.
Ms. Calhoun and Mr. Levine, also emphasize the importance of protecting
your wealth and retirement against depletion from unexpected events. Long
Term Care Insurance is one such tool. Mr. Levine says that the national
average cost of nursing home care today is $8,000 per month. Mr. Levine
notes that a variety of packages are available to fit all kinds of budgets.
Long Term Care coverage, even for an older working age individual can
often be obtained at $200 a month.
If you are receiving sufficient support and have sufficient assets left
over from your divorce, you may be able avoid working by developing a
good investment plan and a disciplined budget. In such cases, it is often
helpful to have a Wealth Advisor help you not only with setting up a living
and investment strategy, but to have quarterly meetings to keep you accountable
to your budget, and to readjust your investments and budget according
to your actual needs and developments in your life.
1. Leslie Calhoun is a Chief Investment Officer and Partner with Optivest.
She focuses on goal oriented investment planning. She states that much
of her clientele are widowed and divorced women. With these clients she
focuses on rebuilding after traumatic events, and on setting expectations
and becoming her client’s accountability partner.
2. Mike Levine specializes in Long Term Care insurance, and other related