Expect the cost of divorce itself to be only the beginning of its financial impact on your life. Unless you’re extremely well-to-do, most people struggle financially after a divorce. Not only does divorce set parents out on the path towards single parenting (with all the financial strains that come along with it), but keep in mind that you may also have to replace several key assets or incur new expenses. What was shared before will have to be divided and doled out during the divorce, and things that you may have relied on each other for in the past will now have to be taken care of on your own. For example . . .
A) You’ll have to decide not only the big things such as who gets the house / car / etc., but you’ll likely have to dole out some significant cash to replace other not-so-obvious things that you took for granted before. Things like microwaves, cameras, radios, televisions, and other smaller household items may need to be replaced. Keep this in mind, and if possible, try to have a little extra cash on hand for such purchases.
B) You’ll no longer be taking advantage of the economy of scale. Each of you will have to pay insurance, maintain separate residences, and pay separate utility bills. So you’re essentially using the same amount of pooled income (separated and evened out through child support) to try and double up on everything. It will seem as though living suddenly got much more expensive, because in a sense, it did.
C) If one parent had been providing child care for the kids as a stay-at-home parent, be prepared for sticker shock when it comes to child care expenses. For instance, reputable infant care at a child care center can run as much as $250 to $350 a week in many areas, and the same for preschool children averages between $150 and $225. Home care is cheaper, but will still take a significant chunk out of your budget.
D) You also may lose other free services that your spouse had been providing. For example, perhaps your husband did basic maintenance on the car or helped do repairs around the house. You may now need to dole out a couple hundred bucks just to get someone to inspect your car and figure out what that strange banging noise is.
Being realistic about child support
Many parents expect that child support will make up for any and all lost income or increased expenses, but alas, this is usually not the case. Child support awards are generally too small to make up the difference and pay for the full task of rearing the children. (Garfinkel, Melli & Robertson, 1994) Furthermore, only 57% of custodial parents have a child support award, and of those, only 47% receive full payments. (Grall, 2007) Payments may also come sporadically or inconsistently.
Whether or not a parent pays their full child support is highly dependent upon their ability to pay, and financial struggles hit noncustodial parents, too. They may lose their job, have a medical emergency, or experience other problems that disrupt their ability to pay. The degree of the noncustodial parent’s contact with their children and their level of devotion that accompanies this also influences the consistency of child support payments. (Thomas & Sawhill, 2005) So it’s just another reason why parents should get along and not try to alienate the other parent.
Stocks & Other Assets
If you’re an active trader in stocks, be aware that these assets might be frozen and placed in escrow during the divorce process which can prevent you from making trades or otherwise managing these assetts.
Budgeting for the costs of living after divorce
Despite the deep financial tsunami that divorce brings about, most people go into divorce without ever sitting down and budgeting for how these changes will affect their standard of living. Unless you want to be unpleasantly surprised, you should spend a little bit of time budgeting for your living expenses after divorce. These budgets need to take into account…
- Child support received or paid out
- How you’ll get by if child support isn’t paid on time
- Costs from added mileage driving to and from work or shuttling children between houses
- Any increases in insurance costs from what you pay now
- The added cost of maintenance for your own residence, cars, etc.
- Costs of child care
- + any of the other hidden expenses we’ve already discussed.