Financial Impact of Divorce on Women
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It's not breaking news that almost half of married couples will eventually divorce; after all, America has the 6th highest divorce rate worldwide.
Yet even though divorce is so common, we still hold distorted views about the reality of divorce and how it impacts women.
This idea that the woman always takes more than half of the man's money, keeping the house and the car while the poor guy goes on to live in a single-bedroom apartment with only a mattress to sleep on, is simply not true.
Because of socioeconomic disparities between genders in all private and public spheres, women are affected much more negatively than men when a couple divorces.
How Divorce Impacts Women Financially
Several studies have now shown that the economic consequences of divorce almost always fall heaviest on the woman.
At the same time, statistically, the man experiences greater financial success after the fallout—highlighting the ever-present divorce gap.
The numbers are shocking: a study carried out by Richard Peterson quantifies that after divorce, women experience a 20% decline in income and standard of living as well as a 27% increase in the risk of poverty.
In comparison, men experience an average 30% increase in household income and standard of living.
On top of that, divorced women are at a much higher risk of losing homeownership and “falling down the housing ladder” than men.
After a divorce, women also risk a drop in their credit score, which can impact their economic recovery.
The two underlying causes of these disparities can be chalked up to:
- the gender wage gap, which renders a husband much more financially stable and independent than his wife
- the household and childrearing duties that fall heavily on the women
These duties will take women away from their careers for an average of two years and prevent them from advancing in their careers as fast as their husbands.
Childcare and homecare will take time away from her ability to earn, while during that time, the man continues to earn without a hitch.
No wonder married women are at such a high risk of losing financial security, housing, and quality of life after experiencing a marital status change to divorce.
Divorce proceedings (which estimate between $15,000-30,000), paying for and keeping a home, securing childcare, and working full time are more likely to be within the economic means of the male and entirely unaffordable to the female.
Overcoming Financial Effects of Divorce
Now, all of this information is not meant to discourage women from pursuing a divorce when their marriage is not working out.
It's better to be informed of the harsh realities and prepare to deal adequately and resourcefully with the financial aspects of a divorce.
The end goal isn't for a losing and winning party in the divorce. The goal is to end up financially independent and secure on the other side of these difficult times.
If you're facing a divorce, here are some steps to help you limit financial losses and get through this major life change as financially sound as possible.
1. Enlist Professional Guidance
You will need to assess your situation to know what kind of help you need. There's a professional for everything: Family lawyers, Divorce Attorneys, Estate or Tax Attorneys, Accountants, Financial Advisors, and Mediators (among many others).
It's important to look at your needs and how much help you will require in reaching a fair and equitable divorce settlement.
Enlisting and hiring help will be an added cost, but going at it alone will likely cost you a lot more in the long run.
A professional will help you create an effective plan to move forward quickly. Many divorce professionals offer free consultations, so you can meet with them and ask questions to find someone you're comfortable with.
If cost is an issue, there are excellent online divorce options that can be very affordable. These services are becoming more popular and can be just as effective as the traditional options when marital dissolution is not contested.
The first step is to look at what help you need and see who is out there that can assist with your situation.
2. Take a Close Look at Debt, Assets, and Retirement Accounts
Suppose you have a number of various types of investments. In that case, this is where an attorney or financial professional might be very useful because of the laws and proceedings governing how to divide these financial assets.
There are different approaches to dividing pensions, IRA's, 401(k)s, and other retirement assets, and a financial professional or attorney can help you find the best way to do so to limit negative financial consequences.
Order a credit report (and have your spouse obtain one, too) and take inventory of what it is you need to separate, including your joint loans, credit cards, and outstanding debt.
You and your spouse (with the help of your divorce lawyers or a mediator if necessary) will have to agree on who will receive what money, property, and other joint assets and who will be responsible for paying off any liabilities.
3. Think about your home
Local and state laws govern how property is handled within a divorce, which is another place a professional would be best suited to help you.
And your house, despite it being your family home, is just another piece of joint property that must be divided equally if possible.
With emotions aside, you must assess whether one of you can afford to keep the home or if it's a better option to have it appraised, agree on a sale price, put it on the market, and divide any proceeds.
If you are leaving the marital home, take your time before deciding on new housing options.
4. Separate all Joint Accounts
After determining what financial accounts, bills, and credit are in both of your names, you'll need to take steps to close them or leave only the name of the person responsible for that account.
Open new checking and savings accounts in your name to ensure that each party is now only responsible for their own income and bills. This process is tedious and can take time, so this is one of the first steps to take and can prevent future problems.
5. Recalculate your Income and Budget
When a divorce happens, you will inevitably lose a big chunk of financial support from your partner, so you need to plan and figure out how you'll substitute and budget for that loss of income.
Determine your new budget—expenses such as bills, groceries, mortgage, insurance plans, car loans, etc.— and plan how much more you will need to earn to start saving and investing in your future financial independence.
Don't forget to look at Social Security to estimate your future retirement income benefits as well.
To increase your disposable income, you might need to obtain new skills or earn an advanced degree, consider making a career change, start a side gig, get a roommate, or even move back home with your parents for a bit.
The journey that is a divorce can be long and winding, and there are a lot of mistakes that can be made—but there is a way to avoid them.
The wage gaps and opportunity gaps between men and women are narrowing, which means that somewhere down the line, the financial strains of divorce will fall more equally on both parties.
Until then, it's up to us women to be as informed and prepared as we can be to ensure our own economic well-being.
Next: Love Thy Self: Practice Financial Self-Care
By Paloma Quevedo, who's been writing about anything that excites and interests her since she first picked up a pencil. She’s a Texas State University graduate with a bachelor’s in English, and her most recent writings include articles for Bon Appetit Magazine, articles for the coaching platform CoCaptain, and everything finance for Paychecks & Balances. She writes from her home office in Austin, Texas, where she lives with her partner, daughter, and orange cat.