Kristen's Story

Although Kristen Ellis had taken a step back in her career for the last five years to stay at home and raise her two young children while her husband took on the role of breadwinner, she felt financially confident about her future as she neared her 42nd birthday. She'd recently re-entered the workforce full-time as a medical sales representative, earning nearly six figures each year.

Despite the fact that their household income was lower while she was at home with the girls, Kristen and her husband had been diligently working toward shorter- and longer-term financial goals since getting married at age 30. They had made the final student loan payments for their own college degrees five years ago. The elimination of that debt allowed them to save for a down payment for the home they bought three years ago — so their daughters would have access to top-notch public education.

While their monthly mortgage payment with taxes and insurance took up more than half of their monthly income, it was worth the short-term financial strain, since Kristen and her husband planned to stay in the home well into retirement.

At least that was the plan six months ago — before Kristen's husband asked her for a divorce.

Now Kristen's facing an entirely new financial reality. She'll have to pay for all of her household expenses, get her own health insurance and juggle a demanding job with a shared custody schedule. The retirement that once seemed like an attainable goal no longer looks possible.

Kristen's thankful she has half of the emergency savings fund she and her husband built together over the years to support her and her children through the transition, but she's not even sure what she can afford each month based on her new budget — or how to plan for a future as a single woman.

Kristen Is Not Alone

This story is reality for the more than one million women who divorce each year, according to the National Center for Family & Marriage Research at Bowling Green State University's latest data. Unfortunately, women tend to pay a higher price for divorce than men.

Money reports that even women in well-paying jobs like Kristen's earn about 80 cents for every dollar a man makes. In the long term, that pay gap means Kristen will have to work 11 years longer than her ex to make up that difference.

Plus, when women like Kristen take a break from the workforce to care for children, those years of reduced earning power could mean lower Social Security income and gaps in retirement contributions.

On top of that, the average life expectancy of a woman is longer than that of a man. Kristen may need her retirement income to pay for basic living expenses more than two decades after she leaves the workforce.

Divorce is a major life transition full of uncertainty and change — but it doesn't have to dismantle a woman's financial future. Here are some ways women can emerge from divorce feeling financially empowered.

Consider What You Own — and Owe

For many women, divorce may mean becoming the sole breadwinner for the first time in several years. That shift in financial responsibility demands a new budget and a revised look at priorities, spending and savings habits, and wants and needs.

1. Create a Spreadsheet

Organize all assets and debts once the divorce is final, including account numbers, creditor names and balances.

Update the names of beneficiaries on investment and retirement accounts, on insurance policies and in your will and estate plan to reflect someone other than your now ex.

Update any joint account holder permissions on deposit accounts or credit cards so your former spouse is no longer named as an authorized user on the account.

2. Know What You'll Earn Each Month

Calculate your monthly take home pay once the divorce is final — accounting for any alimony or child support you'll receive, or be made to pay to your former spouse and to reflect any changes to your take-home pay resulting from the cost of workplace benefits like insurance, flex care plans, or retirement contributions.

3. Make a List of Monthly Expenses

In addition to the fact that costs of living inherently take a bigger chunk of one person's income than bills split between two spouses, divorced women need to consider new expenses, like health insurance.

While children can stay on either spouse's health insurance plan after divorce, divorce expert and Forbes contributor Jeff Landers explains that an ex who was a dependent on the other spouse's plan may qualify for COBRA benefits coverage temporarily — but should plan to secure independent health insurance coverage as soon as possible.

In addition, courts may require that a spouse secure a life insurance policy in order to ensure that alimony or child support payments continue if he or she died.

4. Find a Budgeting Strategy That Fits

Calculate new monthly expenses for home and car payments, utilities, child care, and any shared debt that was included in the divorce agreement.

Experiment with a budgeting strategy that's flexible enough to commit to in this time of transition.

In her book All Your Worth: The Ultimate Lifetime Money Plan, for example, Senator Elizabeth Warren recommends a 50/30/20 budget. This means that half of your monthly take-home pay is dedicated to necessary and unavoidable expenses like housing, utilities, food and loan payments; 30% goes to non-necessity expenses like a mobile phone bill, dining out, a gym membership, or a child's activities, and 20% to savings (including an emergency fund), retirement, or paying off debt more aggressively.

Set New Goals

Women in particular may be tempted to fight for the family home, cars, and other property to maintain some semblance of “normal life" — but those all present expenses that stand in the way of other goals that may be meaningful post-divorce.

Set one attainable, short-term goal — like automatically contributing money from each paycheck into a savings account to fund your first post-divorce vacation, or investing a specific amount of money into your own brokerage account to grow money over the long term.

As you make progress and reach these small goals, you'll gain confidence in your ability to control your financial destiny, regardless of how much the divorce may have set you back.

Look to the Future

A study published by the National Bureau of Economic Research revealed that divorced women are more likely to work full-time between the ages of 50 and 74. Plus, the older a woman is when she divorces, the greater the chance that she will maintain full-time employment well past retirement age.

Divorced women can avoid becoming part of these statistics with a forward-thinking plan to reach retirement.

In addition to maxing out annual retirement contributions to the extent possible — to reap benefits like a “match" offered by an employer and to potentially reduce current taxable income — consider how divorce may impact future Social Security benefits. If Kristen is still unmarried when she's 62 years old, she may be eligible to claim at least part of her ex's Social Security benefits because she was married for at least ten years.

Secure Your Own Story

Divorce uproots the personal and professional lives of many women like Kristen — but it doesn't have to derail your financial security, or define your life. Focus your energy on knowing where you stand today financially and where you want to be moving forward.

Being in charge of your financial destiny after divorce can feel overwhelming; however, your financial success is ultimately the sum total of small, consistent and intentional steps that will eventually lead to reaching your goals.

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