Financial tips and advice for women in a divorce

This article will ... Point out the challenges women face in terms of income and career opportunity following a divorce. Detail the advantages of expert help versus going the do-it-yourself route. Offer advice on priorities and budgeting during the divorce process. Review the marital and retirement assets that should be carefully reviewed in a divorce proceeding.

Women often fare worse financially after a divorce than men do for several reasons. 

In heterosexual marriages where both the man and woman are employed, the man out earns the woman 63.5 percent of the time, according to the Bureau of Labor Statistics.¹ This means that post-divorce, many women lose more than half of the household income they had when they were married.

Further complicating things, women are often the primary caretakers for their children and sometimes for their aging parents, and they take time off work to handle these responsibilities. They may not have advanced as far in their careers as their spouses who didn’t take time off.

If the divorce is the precipitating event that sends them back to work, they not only have to deal with the bias against resume gaps to get hired, they also will likely have to work for less than pay their exes because they don’t have as many years of experience. After an extended absence from the job market, female caretakers might first have to learn new job skills or even embark on a new career altogether. Their lifetime earnings, and therefore their retirement savings and future Social Security benefits, will be lower as a result.

Emotional factors can hurt women financially in a divorce, too. One mistake is not advocating for a fair division of assets because of wanting to get the divorce over with, said Laurie Itkin, a certified divorce financial analyst (CDFA) who helps divorcing women understand the impact of their settlement options. They may not understand that what looks like a 50-50 division on paper really isn’t when factoring in future taxes.

Given these additional hurdles to recovering from divorce that men don’t necessarily face, here are some tips on how women can take a proactive approach to making sure they’ll be financially stable moving forward.

Get legal and financial advice

It’s tempting to pursue a do-it-yourself divorce to save money on attorney’s fees, to avoid going to court, and to get the ordeal over with as quickly and painlessly as possible. A nationwide survey of divorce attorneys’ fees by Nolo, a major publisher of do-it-yourself legal guides, found that the typical divorce attorney’s fee was $270 per hour, and the total attorneys’ fees for the divorce came in around $7,000. In divorce cases that went to trial, attorneys’ fees totaled an average of $20,400.

Nolo’s survey also found that the average divorce took 12 months for cases that did not go to trial and 18 months for those that did. By contrast, Nolo’s research found that completing the divorce paperwork yourself through an online service typically costs just $150 to $500.

Attorney Emily Doscow, writing for Nolo, said DIY divorce may make sense if you and your spouse agree on how to divide up all assets, if you’re confident that your spouse hasn’t hidden any assets from you, and if you agree on child custody, child support, and spousal support issues.²

Once things get more complicated, professional help can result in a better outcome. If an attorney’s fees are out of the question, Doscow suggested saving money by hiring a divorce mediator to help you and your spouse reach an agreement. Private divorce mediation typically costs $3,000 to $8,000, according to Nolo’s survey, and spouses usually divide the cost. (Related: Alternatives to divorce)

Still, it’s important to be judicious when seeking professional help.

“Feeling angry and betrayed sometimes causes women to seek more than they are entitled to under their state’s laws,” Itkin said. “They want to punish their spouse and don’t view receiving 50 percent of the assets or limited duration spousal support as fair.”

“Unfortunately, paying a lawyer to fight for something unreasonable will cost a lot of money and may not result in a more favorable financial outcome than could have been achieved through mediation,” Itkin said.

Prioritize and budget for divorce

During the divorce, women should start with a checklist outlining their financial priorities, property priorities, and priorities for their children to help in the negotiation process and to minimize post-divorce stress, said certified divorce financial analyst and certified financial fiduciary Michael Briggs of Horizon Investment Management in East Longmeadow, Massachusetts.

“Both parties lose financially in a divorce, but the best way to adjust to that is to create a budget and stick to it. Make sure you do the budget before the divorce is final because you only get one chance at a property settlement,” Briggs said.

Since women often get custody of the children and ownership of the house in the divorce, they need to budget for household maintenance and childcare. It’s important to understand how much these things cost so they can negotiate enough money to pay for them in the settlement.

Don't forget your children’s activities, Briggs said. Dance, hockey, and horseback riding are expensive, and you need to budget for them properly, so your money doesn’t run out and your kids don’t have to stop participating.

Get a complete picture of your marital assets

If you think your spouse may be hiding assets from you, consider enlisting an expert to investigate.

“An experienced CDFA can review the last two or three years of tax returns and the [divorce] disclosures and ask questions about the family’s lifestyle,” Itkin said. “Did the family spend more money each year than the tax returns and disclosures would indicate is possible? In that case there could be a good reason to spend additional money on a forensic accountant.”

A forensic accountant is typically more expensive than a CDFA and requires a retainer representing a minimum number of hours, Itkin explained. She recommends starting with the less-expensive option because in her experience, hidden assets are rare. More commonly, the woman simply wasn’t involved in the couple’s financial decision making.

The rise in popularity of cryptocurrency may complicate things.

“Methods to track purchases of cryptocurrency are evolving,” Itkin said. (Related: Should cryptocurrency be in your portfolio?)

Negotiate for retirement assets

One of the most important factors in saving for retirement is time. The later in life you get started, the less time you have to invest and benefit from compound interest. Sock away $500 a month from the time you’re 22 until you’re 65 and you could end up with more than $2.2 million before taxes and inflation if your average annual returns are 8 percent. Start when you’re 42 and you’ll end up with about $400,000 under the same conditions. (Related: The role of life insurance in divorces)

While retirement might seem like a less pressing concern in the aftermath of a divorce than where you’re going to live or who will take care of the kids, making sure you get your fair share of the retirement assets in the divorce settlement will really pay off later. It may be worth conceding other assets, such as the house, to keep your retirement plans on track. And whatever retirement assets you receive, don’t be tempted to cash them out and use them for current expenses.

Additionally, consider disability income insurance needs in your divorce settlement, particularly if you ex will be paying alimony.

Set financial goals

Making a list of specific, attainable goals will help you get moving in the right direction after your divorce.

If you’re starting over with little to nothing, one of your first financial goals should be to create an emergency fund. It will help you handle unexpected expenses without going into debt. (Related: Building your financial pyramid)

Prioritize saving for retirement over saving for your children to attend college. They can get financial aid and loans; you can’t. Contribute whatever you can to your retirement savings, even if it’s only $25. It keeps you in the habit and you can easily increase your contributions later as you get your feet back under you. Maybe one day you’ll remarry someone who has planned well for their retirement, but for the time being, you must rely fully on yourself to fund your retirement. (Related: Busted marriages and college financial aid)

If your ex handled the saving and investing, be assured that the basics aren’t that difficult; you can learn them yourself by reading a few good investing books. But if you aren’t confident in your abilities, there are financial professionals you can consult.

Divorce is difficult for both women and men, financially and emotionally. Proper financial planning during and after the process can make it easier to move on.

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This article was originally published in June 2020. It has been updated.

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