On the surface, divorce is about emotions and a separation of two lives. In practice, it’s mostly about money. The biggest challenge is separating your lives in a way that leaves both parties with a fair net worth and the ability to get by in their new independent life. Things like salaries, expenses, and joint property must be carefully balanced, along with lifestyle maintenance and how to care for the children, if any.
However, more than a few divorcees find that after the divorce, the financial agreements are not nearly as agreeable as they seemed at the bargaining table. The biggest recurring problem is unforeseen expenses and overspending after the divorce, often when divorcees fail to adjust to living on a single income. If you want to avoid facing financial troubles after your divorce, the best course is to understand the risks beforehand. Let’s take a look at five of the top overspending risks for divorcees after a divorce.
1) Property Taxes and Insurance
Living as a married couple is very efficient when it comes to home costs. Two incomes can go a lot further to cover mortgage or rent, utilities, property taxes, and neighborhood fees. However, these living expenses are often overlooked when a divorcing couple argues over “Who gets the house”. The house is seen as having a certain monetary value and possibly an important aspect of child custody. Many parents who get custody care strongly about raising their children in the same house before and after the divorce.
For couples that keep the house instead of selling, whoever winds up owning the home will also get stuck with all the expenses associated with that home. Take another look at your budget and think carefully about utilities, mortgage and property tax. As a word of warning, it’s almost always the property tax that sneaks up on you in single-person homeownership.
2) Lifestyle Expectations
The next major financial challenge of post-divorce life is defining your new lifestyle. A married couple will build a shared lifestyle that is made up of their shared budgets and interests. It’s all too easy for pooled incomes to result in a little bit of indulgence. Many couples develop a taste for wine and drink at home often, or go out to dinner frequently. Maybe you went to the movies, took expensive classes, signed up for monthly services that cut into the recreational budget.
The problem is that with separated living expenses, your separate discretionary funds will also be reduced. All divorced people have to cut back after the divorce because of this logistical fact. If you don’t want to accidentally overspend on dinners and hobbies, watch out for trying to maintain your old lifestyle exactly the way it was.
3) Competitive Gifts for Children
After a divorce, it can be tempting to pour all of your attention and love onto your children. This is only right, they need extra parental love and support during this time, but not everyone does this in a friendly or healthy way. Often, a feeling of competition for the children’s love will manifest in ridiculous overspending on gifts for the kids.
Even parents without a great deal of money may try to buy their children costly gifts, throw lavish parties, or tempt them with fun holidays in order to show up the other parent after the divorce. Even simple doting on your kids because you feel strongly about them can lead to overspending. Do your children a favor and budget carefully, they will be happier with modest gifts and stable home environments.
4) Mid-Life Crisis Spending
One of the best things about a divorce is the opportunity to “get your groove back”. Learning to be a separate, independent, and competent single person can be very rewarding if done correctly. And, of course, we all know that some divorcees take this process as more of a challenge than others.
It’s not uncommon to see classic ‘mid-life crisis’ acting out during and after a divorce, often as an attempt to prove how much better one divorcee is doing on their own. It’s good to celebrate yourself. Reinvent your look, start meeting new people But what you shouldn’t do is buy a car you can barely afford, book a bankrupting vacation, or start spending without caution.
Post-divorce overspending often comes from a desire to feel confident and successful. But you can do that without emptying your bank account. Instead of overspending on flashy expensive items or experiences, get creative. Find ways to enjoy your new single lifestyle without breaking your already stretched bank account.
5) Childcare Costs
Finally, splitting a married couple adds a great deal of complication to the issues of child care. No matter which parent gets custody, there will be times when neither parent is available to watch the kids during work hours. In most cases, both parents must transition to full-time work to support themselves and the family whether or not they were full-time before the divorce.
This means that childcare is necessary, usually in the form of a daycare or a local babysitter. However, because the costs of additional childcare aren’t yet part of your pre-divorce lifestyle, many couples overlook it when bargaining for divorce terms. Childcare is one of the leading causes of overspending precisely because parents don’t see it coming and especially during the summer, costs can really stack up.
Building a strong divorce agreement is all about looking into the future. An ideal agreement allows both parties to separate with an agreeably equal share of personal wealth and responsibility. Be aware of the costs associated with things that may seem like ‘wins’ like getting the house or custody of the children. Be careful about overspending on an impulse after the divorce just to feel better. And finally, be prepared to completely rebuild your lifestyle once separated from your ex-spouse.
The best way to avoid overspending after a divorce is to plan for it ahead of time and look at your post-divorce plans as a whole new life. Not an extension of your old joint life. Whether you are currently planning to divorce or are experiencing troubles after a less-than-ideal divorce, we can help. Contact us today to consult with an experienced family law attorney about how to avoid post-divorce financial concerns.