You hear a lot about the emotional impact a divorce has on a family, but what is less talked about is the financial cost of a divorce. In addition to legal and court fees, the economic impact of a divorce can be far-reaching and affect you for years to come. Though divorce can be expensive, this does not mean that it is better to stay in an unhappy marriage. Instead, you should work to understand how divorce can impact you financially so that you can go into the process prepared. From new financial obligations to a dramatic reduction in your household income, it is important to be prepared for how a divorce will affect you financially.
How Does Divorce Affect You Financially?
After a divorce, you will likely face new financial obligations. These obligations extend beyond child support and spousal support. Even if you are not ordered to make support payments, you will now be fully responsible for your own household. Furthermore, if you share children with your ex-spouse, you will likely be required to share child-rearing expenses. Where previously you and your spouse split household expenses, or perhaps your spouse managed your finances entirely, post-divorce, you will be the one to take the financial reins.
Post-divorce financial obligations may include:
- Rent, mortgage payments, and/or other household expenses
- Living expenses, including groceries, clothing, etc.
- Medical expenses
- Car payments
- Childcare costs, including daycare, school tuition, extracurricular activity costs, etc.
Additionally, your household income will be significantly reduced after a divorce, and your living expenses will increase. Instead of two incomes, you will have to be reliant on only one. Furthermore, if you were a stay-at-home parent or homemaker, you may also be facing a return to the workforce after years away. This sudden change in income and the new need to work outside the home can be difficult to deal with.
Shared & Individual Debt
When going through a divorce, you and your former spouse will be required to come to a property division agreement, or the courts will decide for you. This includes debt division. It is very common for marital debts to be shared equitably by both parties. Consequently, post-divorce, you may find yourself responsible for making debt payments on credit cards, mortgages, personal loans, and car payments. Even if you have been awarded spousal support, this does not mean that you will not be required to take on some of your shared marital debt.
Furthermore, if you have accrued any personal debt during your divorce, you will also be responsible for managing those payments.
To learn more about how debt is divided during a divorce, read our blog post here.
The Cost of Your Divorce
It's also important to remember that the divorce itself will end up costing you. In addition to lawyers and court fees, you may also be dealing with the cost of hiring a mediator or other professionals to help you through the process. Furthermore, the length of your divorce can also significantly impact how much it ends up costing. For example, a contested divorce that is drawn out will be considerably more expensive than an uncontested divorce that takes less time and requires less back and forth.
Similarly, suppose you must go to divorce court to have disputes decided by a judge. In that case, you may also see an increase in expenses compared to cases where the divorcing couple has been able to work things out among themselves. Preparing for and attending litigation can be a complicated, lengthy process, and the longer your divorce takes, the more it is likely to cost you.
How Can I Avoid Financial Ruin While Going Through a Divorce?
Understanding how a divorce may affect you financially is just the first step. It is equally important that you know how to protect yourself financially during the divorce process and beyond. You will often see the recommendation that the couple establishes a prenuptial agreement before getting married. While yes, this will help protect you financially in the event of a divorce, what should you do if you don't have one? Below we provide a few tips on protecting yourself financially during and after your divorce.
Pay Attention to Your Credit Score
While your divorce won't directly impact your credit score, your financial situation around your divorce may. For example, if you and your ex-spouse have shared debt and someone misses a payment or defaults on a loan, this could negatively impact your credit score. Even if your former partner was ordered to pay the debt, your credit will continue to be affected if your name is still associated with the account. Creditors and credit reporting agencies are not required to abide by divorce settlements. This is why you must monitor your credit carefully post-divorce.
Make Timely Debt Payments
Just as it is important that you monitor your credit, it is crucial that you make all debt payments on time each month. If you are new to managing your own finances or are newly responsible for making debt payments, this can be challenging as you have to adjust to remembering when everything is due and in what amount.
To help you adjust to this and to avoid missing a payment, try setting up a calendar alert on your phone or computer that starts reminding you of the upcoming payment a few days before it is due. It is also a good idea to set up auto-payments for as many accounts as possible. Auto-pay will ensure that your payment is debited from your account automatically on or before the due date.
Do Not Miss Court-Ordered Support Payments
If you were ordered to pay child or spousal support as part of your divorce decree, you are legally required to make those payments as outlined by the order. Failure to make child support and spousal support payments can lead to serious consequences, including wage garnishment and withholding your tax returns. You may even be found in contempt of court.
There are situations in which a person's circumstances have changed, or they have suffered a hardship that renders them unable to make court-ordered support payments. If this happens to you, reach out to an attorney as quickly as possible. Do not just ignore the situation. You may have grounds to petition the courts for a child support or spousal support modification.
Similarly, if your former spouse fails to make support payments, speak with a lawyer as soon as you can. There are legal ways to enforce support payments, and an attorney can help you through the process.
If you need help with your divorce, or you need a post-divorce modification, reach out to Burch Shepard Family Law Group for guidance.