Budgeting After Divorce: What Should I Expect?

Budgeting After Divorce: What Should I Expect?

Zlock & Coverdale, P.C.

Langhorne, PA


Practice Areas: Divorce, Family

Divorce always involves some adjustment in terms of the income(s) on which a spouse can rely and depend for day-to-day living expenses and future savings.  The type of adjustment simply varies from case to case.  For instance, there may be a transition from a two income household, where both spouses work outside of the home and pool their incomes, to two single income households, where each spouse relies solely on his or her own income for the same types of expenses.  Alternatively, in a household where one spouse works outside of the home and one spouse serves as the homemaker/child caretaker, there may be a transition from a single income household, to two households that initially rely on that single income (through the payment of spousal support/alimony to the non-working spouse), until eventually both parties rely on their own respective incomes (which vary quite substantially).

Inevitably, these types of adjustments are a source of stress and anxiety, especially for the income inferior spouse and the homemaker/child caretaker spouse.  Although there has been an evolution in recent years and many women are the breadwinners for their families, it oftentimes is the case where the women are in the more precarious financial position.  For these women, in order to mitigate the stress and the anxiety, they need to plan for the future and use the legal benefits they receive to their advantage.

One such legal benefit comes in the form of equitable distribution.  In cases where there is an income disparity, the income inferior spouse will receive more than 50% of the marital estate, in order to put the spouses on more equal (albeit not equal) footing going forward.  Getting more, however, is not enough in and of itself; you have to get more of the right types of assets.  Many women, especially ones who will serve as the primary physical custodians going forward, want to keep the marital residence as part of their share of the marital estate.  While the desire to do so is understandable, it can be a financially detrimental choice, for a variety of reasons.  For one, the marital residence may be far bigger than what is needed, and a bigger property comes with bigger expenses (mortgage payments, real estate taxes, maintenance, heating/cooling, etc.).  Another problem is that the equity in real property has limited growth potential.   As a general rule, funds in a brokerage account/retirement account will grow much more quickly than the equity in real property will increase, so in order to increase her savings for the future, a woman would be well served to take more in these types of liquid assets, and use her share of the equity in the marital residence to purchase a smaller, more manageable property for herself.  It is important to factor these considerations into the negotiations that take place in the context of a divorce.

Another such legal benefit comes in the form of spousal support/alimony.  Given the development that has occurred in the law, spousal support/alimony now is meant to be rehabilitative in nature.  The idea is to “rehabilitate” the spouse receiving such support, in order to enable him/her to have a career and support himself/herself.  Absent special circumstances, the idea is not to provide lifetime support.  Accordingly, a woman must use the spousal support/alimony that she receives wisely, knowing that it will run out at some set point in the future.  One of the best ideas is to focus on career development.  For a woman who ran the household and cared for the child(ren), this may mean finding a new career altogether; I have had many clients who took the difficult step of returning to school and obtained the education necessary to become teachers, nurses, financial advisors, you name it.  For a woman who has a career but earns less than her husband, she may take advantage by building on the foundation she already has, obtaining a higher education degree (Master’s degree, PhD, etc.), or focusing on networking within her profession, to increase her visibility and move up the corporate ladder.  It goes without saying that the involvement of children, particularly younger children, makes all of these tasks more challenging, which is why it is important to have an attorney who will argue for a period of spousal support/alimony that is long enough to get a woman through the period before the children are in school, and then give her some additional time after that, in order to get her affairs in order.

All in all, these challenges may seem daunting, but they are not insurmountable.  With the right support and planning, divorce can be an opportunity for professional growth and personal development.

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