Divorce can be costly, and it can have a long-lasting impact on your financial future. After a divorce, a woman's household income drops by an average of 41%, according to a study published by the US Government Accountability Office. We spoke with Stacy Francis, a certified divorce financial analyst and the founder of Savvy Ladies, a nonprofit that offers free financial education and advice, about how you can prepare your finances for divorce.
Featured expert: Stacy Francis
Stacy Francis - Certified Divorce Financial Analyst (CDFA)
What are some financial challenges I might face post-divorce?
Overall, women tend to take quite a few more years to financially recover from a divorce than our male counterparts. There are a few reasons for that. Women often take a backseat in their careers to take care of others, including the important work of raising children and taking care of aging parents. Women, I’ve found, really struggle when it comes to their finances after a divorce. Especially if they haven’t really been in the driver’s seat and making decisions for their household’s finances.
How can I financially prepare for divorce?
The most important thing is to get on top of your finances. Understand what your income is and what your spending is. Use resources like Mint or YNAB to start tracking what you have coming in and going out. Then, get an understanding of your assets and your debt (that’s often a big surprise for people). Take a look at your house on Zillow to get an estimate of what its value might be. Get copies of your checking and savings account statements. If you're unsure of how much you have in brokerage accounts, go to your tax return and look under the area with dividends, capital gains, distributions, and interest. Often those accounts will list the name of the financial institution where they're located. Try to put as much information together as possible before the divorce proceedings start.
I’m worried about my financial stability post-divorce. Advice?
The lifestyle that you had before your divorce may not be the same after divorce. Quite frankly, about a third of women tell me their lifestyle changes significantly. It's not ideal, but ultimately you have the power to make that divorce settlement work for you financially for the long term. So take stock of what assets you’re leaving the marriage with, and know how much it costs you to live your life on a monthly basis. What is the income coming in? Make sure that the amount that's coming in and the amount going out is positive at the end of the month. Yes, it's important what you walk away from your marriage with, but what's also important is that you get a settlement that works for you and that your monthly spending is sustainable.
How can I ensure a fair division of assets prior to a divorce?
Knowledge is power, and it's the number one thing that is going to get you a settlement that’ll put you on a secure financial track. Get a certified divorce financial analyst who has worked on hundreds of cases. You need someone who is going to advocate for and educate you. You also need to understand what that divorce settlement looks like. Not only for today, because it might sound good now, but where will you be in the future as well.
How can I grow my wealth post-divorce?
Unfortunately, I hear a lot of women say, “I'm going to keep the same investment portfolio I had when I was married,” because they think their ex-spouse is more financially knowledgeable than they are. I’ve found that’s a huge mistake. What's right for you as a married person may not be right for you as a single person. The vast majority of people will want to reduce the amount of risk that they take on in their investments, especially when it comes to their retirement, because this is something that they may have to rely on for the rest of their lives. At the same time, your money needs to be invested in a way that it's going to grow. Not only do you want to create a robust portfolio, but also one that's going to produce what you need to supplement your living expenses and get you out to age 95+. It doesn't matter how brilliant you think that your ex-spouse was when the portfolio was put together. It's very important that you look at it with fresh eyes — and even with a professional — to set it up in a way that’s right for you.
This interview has been edited and condensed for clarity.
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