Your Investments: Financial independence after a divorce

Most individuals let their expenses drive the process, meaning that they spend money without discipline and hope that at the end of the month they don’t go into overdraft.

By AARON KATSMAN
Couple arguing (photo credit: Thinkstock/Imagebank)
Couple arguing
(photo credit: Thinkstock/Imagebank)
‘You’ll never make it without me,” is the a hateful and unfortunately common emotional dagger thrown by an angry husband at his soon-to-be ex-wife, going through divorce proceedings. While many readers are gearing up for next week’s resumption of the summer wedding season, I have spent countless hours counseling a couple of recently divorced women to get on their feet financially.
Each of the women told me that their ex-husbands used the “You’ll never make it without me” line, adding that it was such a devastating thing to hear, they are using it as motivation to get their finances on track and become financially independent for the first times in their adult lives.
For many divorced women, their new financial reality can be intimidating. The need to coordinate a multitude of professionals, including accountants, lawyers, financial advisers and insurance agents, often means running themselves ragged because they are doing this while trying to hold down a job and raise the children.
One of the women I am working with has five small children, a three-quarters-time job and is spending all her “free” time trying to make sense of the mess her ex made, including taking out loans in her name, maxing out credit cards and sticking her with the debt, etc. How does she have time? Thankfully she has a great support system of people helping her with babysitting, making meals and even shopping for her.
Here are some money tips for women having gone or going through a divorce.
Tip No. 1: Take stock The first thing a divorcee needs to do is get her hands around the budget. This is the first step toward financial empowerment. Many clients have told me that by doing this relatively simple exercise, they feel they gained a level of financial control they never assumed they would have.
Regardless of whether you kept a budget while married isn’t relevant. You are going to have a whole new set of expenses and will probably have different sources and levels of income than you had previously. Break your expenses down to those that are monthly and those that are annual.
Once you have that organized, write down all of your various sources of income, salary, child support, National Insurance Institute payments (Bituach Leumi), etc.
What’s important in budgeting is to let your income drive your expenses. This means that 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. While this seems basic, most individuals let their expenses drive the process, meaning that they spend money without discipline and hope that at the end of the month they don’t go into overdraft.
Understanding your budget can also play a major part in the asset division during your divorce proceedings. A wellknown family-law expert recently told me 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.
Tip No. 2: Invest lump sums As part of a divorce settlement, many women come into large lump sums of money and have no idea of what to do with it. It’s important that this money is used to help meet any financial goals that you may have. 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.
Tip No. 3: Take charge For many this new situation is actually therapeutic. According to family mediator Kathleen O’Connell Corcoran, PhD, “After divorce, women experience less stress and better adjustment in general than do men. The reasons for this are that (1) women are more likely to notice marital problems and to feel relief when such problems end, (2) women are more likely than men to rely on social support systems and help from others, and (3) women are more likely to experience an increase in self-esteem when they divorce and add new roles to their lives.”
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.
aaron@lighthousecapital.co.il Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.