retirement

Financial Reasons Not to Divorce

Before you decide to pull the plug on your marriage, you should consider some of the numerous financial cons that can come with splitting up.

Statistically, approximately 50% of all first marriages end in divorce. The odds of second marriages succeeding are lower, and the odds of third marriages making it are lower still. In other words, there is an inverse relationship between the number of marriages a person has and their odds of success.

As a Certified Divorce Financial Analyst, I work with divorcing clients from all walks of life. Many times I encourage them to try counseling before they throw in the towel. It’s not that I don’t want the business, but rather I know that after dividing all of the assets, it can be difficult to maintain one’s prior lifestyle. Unless there is a great deal of money, things can easily become uncomfortably tight.

Here are some areas that each divorcing spouse should think very carefully about:

Keeping the house.

Maintaining 100% of the house on perhaps 50% of the income is challenging under the best of circumstances. The food bill and electric bill may go down, but most likely they will not be cut in half. There may not be enough money to pay all the bills. That may mean getting in over one’s head with a loan with the possibility of losing the house to bankruptcy.

Selling the house.

A couple getting a divorce may want a quick sale in order to put an often-nasty chapter of their lives behind them. That can mean the process ends in a fire sale, which can weaken one’s ability to negotiate the best price. If the buyer knows this, they can submit a low-ball offer, taking advantage of the situation.

Sometimes the timing of selling in a bad market can be awful for the sellers. Whether an unfavorable housing market is seasonal or a product of longer-term fluctuations, selling at the wrong time can cost a lot of money on what might be the couple’s largest asset.

Of course, moving costs can add to the already bad situation.

Additional living costs.

With two households, there are duplicate expenses. For example, there will be two electric bills, two cable bills and so on. Travel might be an added expense, depending on work commutes, parent responsibilities and more.

Professional fees.

Attorney fees are not inexpensive, especially if the divorcing couple battles about every little thing. Additionally, they probably need financial planners , real estate agents, CPAs and other ancillary professionals, all of whom come with a fee. A therapist might be needed to help with emotional anguish associated with divorce.

Self-representation.

There are some that try to save money and represent themselves. They can make serious long-term errors because they don’t know the law, compounded with making emotional decisions.

I am not advocating that someone stays in an abusive marriage to save money. If someone finds themselves in a physically or emotionally abusive situation, leave and let the financial chips fall where they may. Fortunately, in my almost 20 years of practice I have encountered very few clients who have needed to leave due to abuse.

Divorce shouldn’t be a knee-jerk reaction. It should be well thought out and viewed as a long-term solution to a broken-beyond-repair relationship.

About the Author

Barbara Shapiro, CFP®, CDFA®, CeFT

President, HMS Financial Group

Barbara Shapiro is the President of HMS Financial Group located in Dedham, Mass. She is a CFP®, Certified Divorce Financial Analyst and a Financial Transitionist®. She is also co-author of "He Said: She Said: A Practical Guide to Finance and Money During Divorce." Her firm specializes in comprehensive financial planning with a subspecialty in divorce that assists clients' transition from marriage to independence with peace of mind and confidence. Learn more at HMS-Financial.com.

Securities and Advisory Services offered through Cadaret, Grant & Co., Inc., a Registered Investment Adviser and Member FINRA/SIPC. HMS Financial Group and Cadaret, Grant & Co., Inc. are separate entities.

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