Divorce during coronavirus crisis: protect yourself financially
“Divorce is expensive. I used to joke they were going to call it ‘all the money,’ but they changed it to ‘alimony.’ It’s ripping your heart out through your wallet."
By AARON KATSMANCalculating taxes(photo credit: INGIMAGE)
Unfortunately there is a lot of anecdotal evidence that seems to be showing that we are about to see a global surge in divorce that has been sparked by corona. That’s not to say that pre-corona, the world had matrimonial bliss, but rather that corona has been the straw that broke the camel’s back in many cases. While this is a depressing topic for many, it’s also important for those going through the process to be smart about the financial implications of this move.But all hope is not lost. There is evidence that periods of social upheaval also tend to lead to higher marriage rates. In a report by the American Psychological Association titled, “Life course transitions and natural disaster: Marriage, birth and divorce following Hurricane Hugo,” the conclusion was that the rates of all three increased. “Time-series analysis indicated that the year following the hurricane, marriage, birth, and divorce rates increased in the 24 counties declared disaster areas compared with the 22 other counties in the state. Taken together, the results suggested that a life-threatening event motivated people to take significant action in their close relationships that altered their life course.”After the devastating 2011 earthquake and Tsunami in Japan, Lucy Craft of CBS news reported, “One recent survey shows a third of women and a quarter of men more eager to marry because of the disaster.” On the other hand she reported, “But as some exchange rings, divorce is also a smash hit. At this so-called ‘divorce ceremony,’ husbands and wives take part in a strange and somber ritual to nullify their nuptials. Anecdotal evidence says Japanese couples are calling it quits in record numbers.”These are just two examples, but there is a lot of research supporting the theory. I’d like to focus on money tips for women having gone or going through a divorce.What do you need?The first thing a divorcee needs to do is make a budget. This is the first step towards financial empowerment. It’s important to note that your numbers may be skewed because of corona. There is a good chance that expenses for entertainment, for example, are next to nothing, and the food bill is sky high. Keep in mind that one day when we get back to normal the budget numbers will change. Many clients have told me that by doing this relatively simple exercise, they feel that they gained a level of financial control they never assumed they would have. Break your expenses down to those that are monthly and those that are annual, one-time expenses. Once you have that organized, write down all of your various sources of income, salary, child support, Bituah Leumi… etc. Once you know how much money enters your bank account each month, create a budget that limits your spending to the amount of income you have.As I have written previously, “Understanding your budget can also play a major part in the asset division during your divorce proceedings. A well-known family law expert recently told me that much aggravation and time would be saved if women knew how much money they needed to live off of. With this information, women can avoid spending years and thousands of dollars fighting for every last penny. If you know how much you need to live, you’ll know how much money to ask for.”Big chunk of cashAs part of a divorce settlement, you may come into a large lump sum of money. Don’t automatically run out and buy real estate. This money will be used to help meet any financial goals that you may have. If you use it all on property, you may be left with no liquidity, or no way to create much needed supplemental income. If after doing your budget you see that you will need more income to make ends meet, then you will want to make sure that your money is invested in a way that can maximize the amount of income produced, while preserving or even growing your portfolio. I am not against buying a property, but that decision needs to be analyzed first, to make sure that you can afford it.Especially during these corona times, when everyone seems tired and a bit depressed, use this newfound independence and take control of your new financial reality. Speak with a financial adviser and create a plan that will enable you to get on with your life and be financially independent.The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.Aaron Katsman is author of the book ‘Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill),’ is a licensed financial professional both in the United States and Israel and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
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