Women and Divorce: 4 Actions to Put You Financially on Track
By Ann D. Blakey, CFP®
Women experiencing divorce may endure more severe financial and emotional effects from the divorce than men. Women who work are often out-earned by their husbands and, due to higher expectations of caretaking responsibilities, may not have advanced as far in their careers. This means that maintaining their normal lifestyle after divorce is even more difficult.
To compound these hardships, one study found that over half of women in heterosexual marriages leave major financial planning and investment decisions to their husbands, which means women may have an even harder time effectively managing their finances during and after this difficult transition.
We know it’s important that women thinking about or facing divorce begin building financial savviness into their daily routines. If you’re facing divorce, you have all the tools you need to maintain your lifestyle and security after your marriage ends. You just need to know how to access those tools and use them to help you make smart financial decisions.
Organizing your financial records will save you time and money. Good organization is also important to make sure that assets are divided fairly. Depending on the nature of your divorce, you may need to keep these documents in a secure place that your spouse doesn’t have access to, such as a safe deposit box or at the home of trusted family members or friends. Records you need to gather include:
- Bank statements
- Mortgage statements
- Investment and retirement account statements
- Loan documents
- Tax returns
- Wills and estate documents
This list may not include everything you need, but these documents will help you figure out exactly what you make and what you owe, giving you clarity to plan for what comes next. Having these statements available will also help your team be more efficient in working on your behalf.
Action: As you’re gathering these documents, make sure to update your beneficiaries if necessary.
Once you know your true net worth and have more clarity on how assets will be divided between you and your former spouse, you can start to budget and set long-term goals. Create a budget that includes your anticipated expenses during and after the divorce, including attorney fees. If you know your household income is going to decrease, develop a plan for how you will reduce expenses and continue to save.
You may not have been contributing to your retirement accounts as much as you would have liked. Perhaps you were depending on your husband’s contributions to his accounts with the plan they would support you both during retirement. If this is the case, work with your attorney to include retirement assets in the divorce proceedings.
Action: Also develop a plan to start contributing to your retirement accounts as soon as possible.
You also need to build a cash reserve for emergencies. Because women are less likely to be in charge of investments than their husbands, you might be understandably nervous about investing your cash reserve. However, keeping large amounts of money in a savings account is not a good option either.
Because money in savings accounts produces minuscule returns, inflation can significantly reduce the value of your savings. You need a strategy to build a cash reserve with little risk from market downturns, but without inflation risk as well.
Some strategies to optimize your cash reserve include diversifying the places you keep this money. For example, you can open different types of accounts with varying levels of risk and accessibility, such as keeping one portion of your reserve in a high-yield savings account, one portion in bond investments, and one portion in stock investments.
Action: Another option is to work with an experienced, trustworthy investment manager who can help you keep a diversified investment portfolio built around your needs and the purpose for the cash.
No matter your situation, you need a team of trusted experts on your side. Of course your first step is to hire a good family attorney, with experience in crafting and securing fair financial settlements. Once you are divorced, you may find you need a financial planner who can help you navigate your new financial obligations and plan for your retirement and other goals. At Washington Wealth Advisors, I help women in all walks of life build wealth and plan for their future. Connect with me by calling our office at 703.584.2700 or email me at email@example.com or book a consultation online today.
Important WASHINGTON WEALTH ADVISORS DISCLOSURES Information
Washington Wealth Advisors is a fee-only registered investment advisory firm serving busy families, executives, women building wealth, and small business owners. We provide Wealth Advisory Services—financial planning coupled with asset management—guided by a personalized investment strategy based on each client’s unique goals. Our unbiased advice, independent approach, and proactive investment management help to support our clients’ overall financial peace of mind.