How Women Can Keep From Making Themselves Victims in Divorce

Women often don't think far enough ahead in the financial part of divorce.

September 4, 2014, 9:22 AM
PHOTO: Too many women undergoing divorce don't think enough about their long-term financial stability.
Too many women undergoing divorce don't think enough about their long-term financial stability.
Getty Images

-- All too often, women getting divorced become financial victims. Many get settlements that are fair or, in some cases, more than fair. But because they have misguided priorities, they may make choices that aren’t in their best interest, ultimately rendering themselves victims. The sad reality is that they are responsible for this unfortunate fate.

For some women, victim status is assured by the way they relate to their husbands concerning money during their marriages. When they get divorced, the choices they make amid this emotional turmoil may stem from this marital dynamic in ways that make their situations worse. By contrast, women who are financially empowered are more likely to make choices in their best interest.

If women are to emerge from divorce in a financial situation that works for them in the long run, many need to begin thinking in a new way. Just thinking straight is difficult when undergoing this emotionally wrenching process. Thinking about money in a new way is especially difficult.

Critical to this new mindset is the importance of looking out for yourself – not just regarding the division of marital assets, but also regarding your long-term financial security. Many women who have been financially dependent on their husbands in marriage make the mistake of continuing this dependence after divorce by focusing too much on alimony. There’s nothing inherently wrong with getting alimony, especially if you’ve foregone career opportunities to stay home with the children, enabling him to advance his career. However, obsessing over alimony to the exclusion of self-reliance can be an error with serious consequences.

You may not get all of this money; some ex-husbands disappear to avoid their alimony (and child-support) obligations or they just don’t pay, and it can be extremely difficult to get them to make up missed payments. They could become disabled, unable to work, or they might die. Many women think they have this covered by life insurance, but what if, to give an extreme example, he commits suicide? Then the insurance company may not pay.

Also, in many states where alimony is common, divorce agreements typically limit the total amount and duration of alimony payments. What will you do when the payments end?

A more fundamental problem with obsessing over alimony is it’s a distraction from what should be your real focus: earning a living. If you can get alimony, fine. But instead of getting as much alimony, perhaps you can secure a provision in your divorce agreement to receive money for tuition for more education or skills training to increase your value on the job market.

If you’re working already, of course, there’s not as much need for alimony, though you’ll probably need to make more money. Consider the old adage about learning to fish versus receiving a fish. If you’re in your 30s, 40s, or 50s when you get divorced, becoming equipped to get a job or increase your existing income can make a significant long-term difference.

Failing to realize the importance of true independence, some women undergoing settlement negotiations don’t like to talk about increasing their incomes -- or, if they don’t have a job, about getting one -- because they believe they’ll get a better deal in their agreement if they appear helpless (victims). They should be aware that because they’re not focusing on their own earning potential, their fixation on alimony could cost them dearly.

Regardless of their post-divorce earnings picture, many women make self-defeating decisions regarding their property settlements. A prime example of this is the common fixation on trying to get the house. They think of how their children used the swing set in the backyard, and irrationally connect motherhood with getting the house. Emotionally tied to their homes, they don’t consider a host of important financial factors.

When a couple divorces, one household becomes two. This is expensive. Critical questions include:

  • Can you and your husband afford not to sell the house? Do you have enough other assets that one partner can be fairly compensated for the equity in the home? This assumes that there is substantial equity which, given the prevalence of outsized mortgages, often isn’t the case.
  • Assuming that there are enough other assets, can you afford to own the house – not just initially, but down the road? Will your post-divorce income be enough to pay the mortgage each month?
  • Can you afford the upkeep costs – energy bills, repairs, renovations, yard maintenance among them – that would be far lower with a smaller, less expensive home or a townhouse or condominium?

Typically, women are advised on such matters by divorce attorneys who, instead of looking at long-term financial-planning impacts, simplistically view property settlements as a snapshot of present-day value. As a result, many women fail to realize that getting the house might imperil their ultimate security because the financial burden of the house may severely limit their ability to set aside money for retirement. Depending on their age at the time of divorce, retirement may be the last thing on their minds.

Instead of getting the house, perhaps it would be better to get a fair share of the liquid assets (which may include money from the sale of the house), plus money for job-training or additional education.

The goal of post-divorce life should be financial independence and self-reliance. Finding a man with money after divorce isn’t independence; it’s dependence. As is the case when you’re married, a man is not the answer to your financial situation.

Often, the die is cast for becoming a financial victim of divorce during the marriage. The way to avert this fate is to claim your financial power and to use it to make beneficial decisions during – and, if you get divorced, after – your marriage. Claiming this power is an uphill battle when you’re divorcing, but it’s all the more necessary then.

Any opinions expressed here are solely those of the author.

Laura Mattia is a partner with Baron Financial Group, and a fee-only financial advisor. She's a Certified Financial Planner professional (CFP®), a Chartered Retirement Plan Specialist (CRPS®) and a Certified Divorce Financial Analyst (CDFA™) and holds an M.B.A. in accounting/finance. Her Internet radio show is Financially Empowering Women™ with Laura Mattia. A former professor at the Rutgers University Business School, Mattia is completing a Ph.D. in financial planning from Texas Tech University; her dissertation is on how to help women plan for retirement.

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