Last year, my husband asked for a divorce. Four months later, it was a done deal and we were both in good financial positions.
While I understand that not everyone is as fortunate as I am in terms of relations with an ex, and with the money situation, the reality is that divorce doesn’t have to devastate you financially. Here are 3 things I learned that can help you avoid a huge financial catastrophe when you divorce.
1. Avoid the Lawyers Whenever Possible
One of the biggest reasons that we ended up in a better financial place is due to the fact that we were able to avoid lawyers for the most part. Rather than fighting over everything, we sat down and talked about the situation. Our “kitchen table” approach led to us dividing up everything satisfactorily, as well as to working out an arrangement for our son that took his needs into consideration—and put them first.
Legal costs, on average, run around $15,000 to $20,000 when you go all-out. This is because you are paying for the time the lawyers spend hammering everything out. If you want to save money, you can use mediators, which cost closer to $2,000 to $4,000. And you can really save if you did what my ex and I did. We decided everything on our own, and then presented our preferences to my uncle, the lawyer, who handled everything from there. Our divorce cost us less than $300 because we only involved a lawyer at the end (and we probably got a discount because he’s a relative).
If you have a relationship that allows you to work things out amicably on your own, you will have a financial advantage.
2. Be Honest and Respectful
Mutual respect is a big deal if you want to avoid a financial mess when you divorce. Unfortunately, there are situations where this isn’t possible. If you are in a position where you need to leave because of abuse or some other untenable circumstance, you might need to take advantage of community resources designed to help you.
However, if the divorce isn’t precipitated by a desperate situation, it’s important to be honest and respectful if you don’t want to end up paying a great deal of money. My ex and I decided that our goal was to make things as easy as possible for us to start new lives, and as easy as possible for our son. That decision to look at the big picture, and work out a way for both of us to start in as good a position as possible, was based on mutual respect and honesty.
We sat down and figured out what each of us would need to get a new start. He decided to move into a cheaper apartment closer to his work, and I decided to move across the country to live near my family so my son and I could get help and support as needed. Even though I was hurt that he asked for a divorce, and he was sad to see us (especially my son) move across the country, we both set that aside in the interest of what would make things work for us both in new lives.
The reality is that my ex has never helped much with our son, nor attended his activities, so moving close to my parents, who go to everything and are there for him (and me), makes sense. We have a schedule worked out that allows my ex as much contact with our son as he wants, and that has worked well.
But the key has been honesty about our needs and hopes, and enough respect for each other to try and ensure that things work out for the both of us, as well as doing what we can jointly to help our son. Coparenting, rather than trying to get our son on a “side,” has been a big help, too, since it means we are reasonable about costs and we share those costs.
3. Get Rid of Joint Finances ASAP
While my ex and I were fortunate to trust each other, we did what we could to separate our finances as quickly as possible to make that division quick. Having joint financial accounts can make marriage easier. But it can be a problem once either of you files for divorce, especially if one spouse is hiding money.
It can help to sell the house, rather than try to work out a complicated agreement for one of you to buy the other out. Just sell, and split any profits (or share the losses). Refinance the debt you can. Because I am self-employed, our lender wouldn’t let me refinance the car loan under my name only, so we haven’t been able to do that. However, I am paying the loan because I use the car, and the lender did change to put name first on the loan.
It’s easier to divide everything up if you can do so equitably, and if you can establish your own finances quickly.
Note: Every situation is different, so here are a few things to consider as you split your finances: opening a checking account, getting your own auto insurance policy, updating beneficiaries on your retirement plans and life insurance policy, and canceling joint credit accounts (when possible).
We were able to do so with a minimum of fuss, and it saved us fighting over money, running the risk of having the other make a mistake and ruin credit, and any number of other issues. Plus, dividing everything up quickly, and closing joint accounts, allowed us to present our completed divorce arrangement to the lawyer in full form without wrangling and complications.
Divorce is rarely easy, and I know that I managed pretty well. Not everyone will be so fortunate, but if you can keep your head about you, and work something out, you can both avoid the kind of financial ruin that only enriches the lawyers.
Beyond the Money: What Else to Think About During Divorce
When it comes to divorce, there are a lot of money issues to deal with, from who is responsible for what debt and how the assets should be divided. Divorce can even affect your Social Security benefits.
As I was thinking through our divorce, I realized that breaking up isn’t just about the finances. If you’ve been “one entity” for quite some time, there are other considerations that come with divorce, including:
What happens to your stuff when you divorce? Who gets to keep the TV, and who gets the dining set? You’ve probably acquired a number of things together, from the movie collection to bedsheets. All of these things need to be divided up.
In the case of one couple I know, they just decided that everything that they didn’t bring to the marriage with them would be sold and the proceeds would be divided between them. Other couples I know negotiate, creating a give-and-take situation.
And there are some cases that require the intervention of a judge to settle the dispute over stuff. When you think about how much you have bought together, or given to each other as gifts, you can see how dividing it all up can be a difficult task.
My husband and I share a number of accounts. How do you split the iTunes account, the Amazon account, the Etsy account, and any number of accounts that we both have access to. Who gets to keep the login?
On the other hand, it might also make sense for both of us to open new accounts and then delete the old shared account. The real issue, though, would be answering this question: What happens with all the digital goods? Music, movies, TV shows, and apps are all bought with the authorization of our shared account. What happens to all of that if we move on?
It can be awkward for friends of a formerly-married couple. Who do they support? Can they really be supportive of you both? How do the relationships work? These are questions that are hard to answer—especially if you have a lot of couple friends that you used to do things.
Another issue is what do you do about your ex-spouse’s family? I’m not going to get into the thorny issue of child custody, but if you have the kids most of the time, you do need to figure out how they can see their other grandparents. How do you make it happen without being overly awkward?
Dividing Your Lives
One answer is to have somewhat divided lives. You and your spouse can keep things separate throughout—just in case. You might also put together a pre-nup to make things a little easier.
But for some couples, that doesn’t seem quite right, either. Few people like to feel as though they are planning to break up at some point, especially if you get to the point where you decide to marry.
What do you think? Have you had to handle a tricky breakup? How would you approach a relationship in the future?
How We Manage Our Money on a Daily Basis