Women sometimes go into divorce with a mistaken impression that they are likely to come out with a golden parachute. That is rarely the case. In 69% of couples, the man makes more money. This is largely because women are more likely to take a step back from their careers to have children.
Divorce makes this inequality worse. Women tend to see a 20% decrease in their income after a divorce, while men tend to see a 30% increase. That means there are special needs for financial planning for women after divorce.
Here are a few tips to think about.
Take a timeout
Many experts counsel newly divorced people to take a bit of a pause right after a divorce before making any rash decisions. Financial Guru Dave Ramsey’s blog, for example, warns that new divorcees should not make life-changing decisions while in an emotional state.
A new car or even moving to a new location might be tempting, but making rash decisions can lead to big financial consequences.
Instead, it is probably best for most women to rent a small apartment while they settle into their new lifestyle. Take some time to get adjusted before finding a more long-term living arrangement.
The experts at Morgan Stanley say it is very important to pull together all your key documents, including financial statements, insurance policies, tax returns, loan documents, and more.
The beneficiaries all need to be updated as well. The account owner is often asked to name a beneficiary that will receive the funds in the account when the owner dies. That can lead to unfortunate results after a divorce.
For example, when a woman opens a bank account she may name her husband as the beneficiary and her children as secondary beneficiaries. Well, she probably does not want her funds going to her ex-husband when she dies so those designations need to be changed.
She may also need to get new health and disability insurance.
A newly-single woman may also need to arrange taxes for the first time.
Budget the money
Once all the paperwork is in order, a newly-single spouse needs to figure out her budget. It is a simple matter of needing more money to come in than what goes out.
If the budget is out of whack, then either expenses need to be cut back or income needs to be increased.
Most people focus on cutting back expenses, but sometimes income can be increased in the aftermath of a divorce as well.
A single spouse may be able to work longer hours or move for a better job, for example.
Women are often shocked by how much their budget changes after a divorce. They lose their husband’s income, obviously, but that is not the only issue.
She now has to have her own home and it has to be big enough for kids to visit if the couple has any. In essence, a divorced couple with children is trying to run two households for the price of whatever their joint income was.