According to a national survey by Experian, many divorcees regret not being more involved in household finances during their marriage and say it played a role in the split. I’m not surprised by this and I see it often in both mediation and coaching clients.
I’ve worked with clients who
- knew nothing about the marital finances and who have had to work hard to get up to speed while bumping up against court deadlines.
- shared that they and their spouse had very different philosophies about money and that it had always been a problem.
- have been spending beyond their means thinking that that was the path to keeping the marriage together.
- can’t see how they can get divorced because the cost of living apart is more than their combined incomes.
- have completely unrealistic expectations for the division of household finances.
Not surprisingly, 53 percent of divorcees surveyed by Experian said they were not financially compatible with their former spouse. Only a third of respondents considered themselves compatible. Some 59 percent said finances played a role in their decision to divorce while 7 percent said it was the primary cause of the end of the marriage.
Experian found the average amount of financial loss from divorce was $19,922 although 23 percent reported losses of $50,000 or more. Based on my experience, I would imagine these higher losses stem from child custody disputes and even then I think this number is on the low end of the scale.
The survey found some 55 percent incurred court costs associated with divorcing – I’m not sure what’s included in here as the court fees themselves certainly in Colorado seem pretty modest. If you file jointly with your spouse it’ll cost you $230.
Some 53 percent of survey respondents paid divorce attorneys. I found this interesting and I’m curious as to how this has changed in the last 10 years. Anecdotally, I would say that historically people have assumed that if you needed to divorce then you had to have an attorney. The landscape however has changed. There are many people who simply don’t have the assets that warrant seeking legal advice and for whom, dividing the household finances is straightforward. There are also many resources available now to guide people through doing their own divorce such as companies that will help prepare the paperwork for you (this one will help you file for divorce for just $159), and free legal form clinics offered through the courts themselves.
Some 21 percent of respondents paid for mediation – there could be some overlap here with people who paid for both mediation and divorce attorneys. As a mediator, I wish this number were higher as I truly believe a mediated divorce is a viable, cost effective option for many people who need some guidance through the process, who don’t have complex or high value assets and who could come to an agreement with the help of a third party facilitator that can help create solutions that work for the couple.
So what do you do if you’re facing divorce? Experian came up with their top 7 financial tips when facing divorce from recommendations from Emma Johnson from Wealthy Single Mommy, Diana Shepherd from Divorce Magazine and myself. In nutshell here they are:
Wealthy Single Mommy said:
- Separate your finances from your STBX as soon as possible
- Never under-earn to maximize the child support or alimony you can claim from your ex (or minimize how much you have to pay your spouse)
- Understand that unlike child support, spousal support (aka ‘alimony’) is typically considered taxable income to the person receiving it and tax-deductible for the payer.
- Don’t enable a shopaholic spouse
- Figure out your financial situation
- Create a balance sheet by pulling together all the financial assets and liabilities you and your STBX have and totaling the values
- Get your credit report
So what about you? What role did finances play in your divorce? Are you more financially literate after your divorce? How much did your divorce cost you?
About the survey
The online survey was conducted by Edelman Intelligence on Experian’s behalf from Nov. 2 to 15, 2016, among 500 adults who have gotten divorced within the past five years, are 18 years of age or older, and reside in the United States. This online survey is not based on a probability sample; therefore, no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables, please contact firstname.lastname@example.org.