The 5D’s: Divorce

Be Prepared, Not Scared is our motto at DivaCFO but divorce isn’t something anyone hopes or plans for. Unfortunately, divorce is a reality that many of us go through. .Our close friend, Cindy*, and her husband of almost 20 years divorced in 2010. Their divorce was cordial, without mud-slinging or petty drama, but that isn’t to say it was a walk in the park. Divorce not only comes with several emotional hurdles, it comes with major financial ones too.

 “People going into divorce are emotionally wiped out,” Tracy Stewart, Divorce CPA, tells us, “which makes it hard to think with financial clarity.”

Cindy admits that the huge challenge of divorce is that, “You have to come to a financial agreement with your ex that accounts for today AND tomorrow.” She quickly realized that she did not want to go through this alone and found a CPA who not only specialized in divorce, but focuses her practice on women in divorce.

 “The first step for anyone who is facing a divorce is to find a CPA who specializes in divorce,” Stewart says. “They will help you understand what your financial situation looks like and give you their honest opinion of local attorneys.”

Working with a CPA will help you make your time with your attorney as efficient as possible and they are typically much less expensive to work with. Stewart helps her clients estimate their post-divorce expenses with a Divorce Budget Spreadsheet (here). To get an idea of their budget, Stewart asks her clients to pull 12 months of bank statements and list every single transaction. She then helps them figure out what percentage of the spending is theirs, what percentage is their spouse’s and what percentage is the children’s.

 “It’s so overwhelming!” Cindy admits. “My husband and I didn’t live on a budget when we were married. I had no sense on what I was spending on something as simple as groceries.  So I put a sticky note in my wallet and every time I went to the grocery store I would write down how much I spent.”

Divorce is a marathon not a sprint.  Cindy avoided getting overwhelmed by doing a bit at a time. “I would take ten items and get those done. Then I would stop, reward myself with retail therapy and go back next week and do another ten. “

Cindy was kind enough to share some financial details of her split. Remember, no divorce is the same, and what worked for Cindy and her husband may not be the best choice for you.

Joint Ownership of the House

Even though they’ve been divorced for two years, Cindy and her husband jointly own their house. This was part of their settlement for investment and tax reasons. “When women go through divorce one of the most traumatic things for them would be for the children to have to leave the house that they grew up in,” says Cindy. But often times the woman can’t afford the house on her own, so the husband helps finance the home and keeps partial ownership. Cindy and her husband have agreed to revisit this situation after their two high-schoolers head off to college.

Their Budget

Cindy’s husband contributes 50% to all household related expenses, including utility and grocery bills. They have agreed to contribute equally to their children’s higher education and, heaven forbid, serious medical expenses. Cindy points out that their budget will have to be updated as their life changes. For example, her children will be on her health insurance until they are 26, meaning her husband will have to offset that item until then. After that, the budget will have to be revised accordingly.

Their Credit

As a member of a dual income household, Cindy and her husband contributed equally to the bills.  Over the past two decades they had built up a lot of great credit buying homes, cars, and paying everything on time. But once they got divorced, Cindy realized that she no longer had good credit-  all of the  bills {besides the house} she was contributing to were under her husband’s name.

“My car is still in his name. We didn’t buy the car thinking we were getting divorced. So every time I pay my car bill on time, I don’t get credit for it, he does. It’s very frustrating.”

Our advice for every woman out there is to build your OWN credit by having your name on the bill as the primary payer so good credit isn’t only built for your husband. This is true even if you are a stay at home mom and not financially contributing to pay those bills. Don’t worry, we know your job is harder and more important  than any other out there, so don’t undervalue yourself here! You deserve to build a strong credit score for yourself and should, in case any of the 5D’s hit!

*Name has been changed to protect the identity of our divorced Diva
Have you been through a divorce? What did you learn? Was your experience similar to Cindy’s? Share your stories with us in the comments below! For more on the 5D’s or divorce visit here or here.

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