U.S. News recently ran a very interesting article regarding women and divorce. Some of the statistics seem surprising. For example, marriage provides higher financial benefits to women than men – married women earn 20% more than women of all other marital status and even more than unmarried men. But after divorce, women’s median income drops nearly by half! The dramatic change in financial fortune requires a great deal of financial planning both during and after divorce.
Why do women experience such a drop in earnings as a result of divorce? Several factors are at play. First, we still have a gender pay gap where men earn more than women for the same work. Second, women make more employment sacrifices during marriage to take care of the children, and as a result, when reentering the job market have less experience and command less salary. Third, divorced women tend to have more childrearing responsibilities and therefore more child-related needs and expenses, which can reduce employment opportunities.
Given these market realities, women during divorce need to be proactive. First, they must be informed about the family finances. What does each spouse contribute to paying the bills? What investments and retirement accounts do they own? How much debt do they have together and separately? How is your credit rating? What is your present earning potential? If you had to establish a household tomorrow, what could you afford and how? If you had to downsize, how would you approach it and what compromises are you willing to make? What amount of spousal support would you require and for how long? Consider your age and long run earning potential – how much retirement can you save in that time period? All of these answers will allow you to better inform yourself as to your immediate and long-term future.
U.S. News suggests taking the reins early in the process and not delay because you can dig an early hole during and right after divorce. This is sound financial advice. Utilize the divorce process and leverage what you can to reach an agreement that protects you for the long run.
If you have questions about finances and divorce, contact us – we can help.