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Sidebar ''Purdue study suggests marrying for love and money''
"Planning for divorce takes time and knowledge, perhaps even more planning than for marriage," says Flora Williams, associate professor of family and consumer economics and expert on financial counseling.
She suggests that couples considering divorce consult a financial counselor before they see their attorneys. "Financial counselors can present a realistic picture of what you can expect financially after divorce," Williams says. "Looking at the numbers may change a person's desire for a divorce. You might be exchanging one set of problems for another."
She says a financial counselor also can help mediate a fair divorce settlement.
She says divorce causes many shifts and strains on finances. Researchers say the poverty rate for divorced women ages 25 to 34 is nearly 40 percent. For married women, it's about 8 percent. Williams says the cost of establishing two households and quickly liquidating jointly held property can prove costly for both spouses.
Projecting future costs is one of the areas people typically underestimate. "When your children are preschool age, their expenses are roughly in the single-digit range; in grade school they require double-digit expenses; by high school you're looking at triple-digit expenses; and for the college years, four-digit expenses," Williams says.
Williams cites the example of a child who didn't get to take swim lessons because his divorced parents couldn't agree who would pay for it. "During a crisis like divorce, people don't think long-term. Feelings of anger, guilt, depression or revenge can cloud rational thinking," she says.
Williams says being awarded child support isn't the same thing as getting it. She says some custodial parents from the start see little or none of the money they are supposed to receive. Others receive payments until some other crisis occurs, such as unemployment or problems about visitation.
Housing is most families' largest monthly expense, but during a divorce, people can make housing decisions on emotional and immediate concerns. "Considerations on housing should include one's ability to afford upkeep and other costs associated with the home after the divorce," she says. "Other factors are the qualifications for a new loan, market value of the home and the current monthly mortgage payment compared to projected payments for an alternative home."
A 50-50 split of assets may sound fair, but the courts may decide on an unequal division of community property based on factors such as the length of the marriage; the cost of educating or training a spouse for employment after divorce; the age, health or occupation of each spouse; and present or potential earning capability of either spouse.
Although alimony is rarely awarded, Williams says spousal support payments may become an issue. For example, an older woman coming from a long-term marriage may need additional money if she previously did not work. Most couples have a net worth of less than $20,000. The property is divided up once, whereas "career assets" can produce income for years. If the woman will run out of money in eight years while the husband becomes wealthy, then the settlement needs to be adjusted, Williams says.
She says the value of services done for the family can also be calculated into the settlement. "If one spouse stayed at home with the kids, took care of a parent or served as a hostess for clients -- these are all activities that reduced expenses and allowed for the accumulation of wealth," she says. A financial counselor can estimate the value of these contributions and adjust the proposed settlement accordingly.
Filing for divorce also deteriorates credit ratings. "At the time of separation, couples should immediately close all jointly held lines of credit and credit cards. Then each spouse should establish credit in his or her own name before filing for divorce," Williams suggests.
Of course, abusing credit and improperly handling money may have contributed to the break up. She says spouses who wasted family assets may also be penalized for their behavior in figuring the settlement. The financial counselor can recommend ways to adjust spending and best utilize financial resources. "Changing the system, instead of the members of the family, may solve some of those marital problems," Williams says.
Source: Flora Williams, (765) 494-8297; e-mail, floraw@purdue.edu
Writer: Beth Forbes, (765) 494-9723; e-mail, beth_forbes@purdue.edu
Purdue News Service: (765) 494-2096; e-mail, purduenews@purdue.edu
