I’ve Fallen in and I Can’t Get Out!

Have you come across the poem “There’s a Hole in My Sidewalk” by the late Portia Nelson?

To me, it’s so profound that I’ve never forgotten it.  The idea of falling into a hole and finding the way out reminds me of making bad decisions, but eventually, with insight, learning to make better choices. Ideally, we don’t fall into the next hole, but navigate around it.

As I consider the difficult journey down the “sidewalk of divorce”, I think the holes from the poem represent mistakes we women could fall into if we are unfamiliar with the issues of divorce.  With anticipatory guidance, though, I believe there is hope even when challenges are on the horizon.

For women journeying down the sidewalk of separation and divorce, you can fall into a financial hole that is very difficult to climb out of.  Research shows that women’s financial lives tend to be more negatively impacted by divorce than those of men. The Northern Trust Institute cites an average 30% decline in a woman’s standard of living following divorce, but only a 10% decline on average for men.  There are many reasons, but in the big picture, the primary issue is that as women, we tend to have fewer years of employment, less savings, less experience with financial matters such as investing, and we tend to live longer than men.  Because of this reality, we don’t have the luxury to make unforced financial errors in divorce.  We need to be educated about where those holes lurk ahead on the sidewalk as we walk through divorce.

Sidewalk hole #1

Not having cash or access to assets

Divorce takes money.  Over the many years I have been guiding women about financial matters, I’ve never met anyone who was eager to spend the money necessary to get a lawyer involved in their case.  It feels like spending money to dig a hole in the backyard and then put a brand-new septic tank down in the hole, then cover it up like nothing ever happened.  Sounds like a great time, right?

Nonetheless, a marriage is a legal relationship, and there are laws (that differ state by state) as to who gets what when a marriage is dissolved.  More often than not, you’ll need legal advice and representation.  Lawyers have different services and fee structures, but they all cost money.

Counselors, therapists, coaches, etc., can also be a necessary part of the divorce team.  It is mission-critical that you are in the best head space possible (again, think about avoiding falling into the hole) so you make the best decisions possible as you navigate the bumpy sidewalk of divorce.  Even with health insurance coverage, therapeutic health services cost money.

Also, consider what happens if you have to move out of the marital home?  Housing can be the biggest bill of all living expenses.  You’ll need rent and a deposit unless you can stay with family or friends.  Utilities, groceries, gas, etc., all add up when there are two separate households to support.  I’ve seen landlords ask for multiple months of upfront rent or documentation that a potential renter has 3-4 months’ cash on hand in order to secure a rental agreement.

What if you’ve got a different situation where you are remaining in the marital home while the supporting spouse moves out?  Phase 1 may be where he pays both his separate expenses and the marital home expenses.

In this phase, cash flows are stable.  Phase 2 can crop up when the supporting spouse decides he is tired of paying for two lifestyles and ceases to pay the marital home bills.  Now what?

Long story short, if you are going through a separation and divorce, you will need access to cash.  Here are some places where cash might be found:

Can you work?  If you are working part-time, can you get full-time work?  If you worked years ago, can you brush up your resume and go back in that field, or maybe another?  If you’ve never worked, and you have your health, can you find some way to earn a paycheck? CAUTION: Talk with your legal representation before embarking on employment changes.

More places to find cash include: Individual bank or investment accounts, joint bank or investment accounts, hardship withdrawals from retirement accounts (both personal and employer-sponsored), proceeds from selling unwanted personal items such as jewelry, cash from CDs or whole life insurance policies.

Borrowing may be an option.  You could put expenses on credit cards. If you are working and have a 401(k) you may be able to take out a loan against it.   You could possibly borrow on home equity lines of credit.  Either way, keep in mind that debt is never free, so you need to be wise as you consider borrowing in any form.  Do not borrow more than you can afford to carry in payments, as it is important that you pay on time to protect your credit score.

Some women are able to borrow from family and friends.  This can be a big help, and not just for young women just starting out.  FYI, for the last few years, the highest rates of increase in divorce are for Americans aged 50+.  I am currently working with several women who are going through divorce and have had to borrow from elderly and retired parents.  It is not ideal, but most women are not in ideal circumstances as they navigate the bumpy sidewalk of divorce.

Think creatively about any/all the ways you can access capital for your expenses.

With some regularity, I’ve talked with women who were not able to achieve the financial fairness they were entitled to under the state laws because they could not afford the legal costs to fight for their rights.  That’s a huge hole you’ll want to stay out of.   Having access to cash gives you options.

Sidewalk Hole #2

Thinking you are in a sprint when you are really in a marathon.

Over the years, I’ve heard many versions of this: “Eileen, I need for this to be over.  I can’t take it anymore.  He can have the house; he can keep his accounts.  I don’t need child support, I don’t want alimony, I just need this to be over.”

Women who’ve been married 30+ years and who’ve never worked outside the home, who’ve raised families and admit they know virtually nothing about their family finances have said things like this to me.  My heart hurts for them. The separation and divorce process hurts.  It can hurt badly.

It’s normal for us as humans to want to make the hurting stop. Please know, you can and will get through the hurt.  It’s not easy, and most of us can benefit from having supportive friends and family to lean on so you can catch your breath during the marathon.  Equally important is having a professional counselor who can help you find your center and teach you the tools you need to minimize the negative impacts of dealing with stress over a protracted divorce journey.  For most of us, a month of chaos feels too long to bear.  It’s tempting to think divorce can be properly dealt with like a wound with a Band-Aid; pulled off in one quick, excruciating moment, and then all will be well. Your future is too important to rush headlong into the dizzying array of financial decisions.  Your next chapter of hope and confidence is waiting for you.  It’s willing to wait for you, so don’t rush.

Separation and divorce take time.  States have different timelines that must be navigated before the marriage is legally dissolved.  More often than not, somebody’s going to have to move out.  Sometimes neither party wants to or is even in the financial position to do so.

Besides that, the parties involved already don’t agree about much.  Factual data must be uncovered.  One party or the other may not be forthcoming about the family finances.  Marital monies may have been hidden or wasted.  Debt may have accrued that only one spouse knows about.  Infidelity may be involved.  Substance issues may be part of the problem.  When children are part of the family story, there are custody agreements to deal with.  Finally, Attorneys are busy, and the courts are often backed up.

I could go on, but suffice it to say that rushing to get to the finish line can leave you with regret.  Speedy resolution may feel like a huge relief at first, but once you agree to something or forfeit your claim to something, it may be impossible to reverse the financial damage to you and your future.

Knowing in advance that it may take more time than you’d prefer to successfully navigate that sidewalk may help you avoid falling in the holes.

Sidewalk Hole #3

You don’t know what you don’t know.

This huge hole in the sidewalk of a divorce journey has swallowed up too many women.  I don’t want you to be one of them.

What don’t you know?  Divorce has lots of elements intertwined, such as law, finance, emotions, kids, real estate, tax, insurance, lending and more.  Take the time to thoughtfully assess the knowledge gaps you have and know that there are people who can help.  Maybe you just need a little targeted guidance or perhaps you need a lot of savvy support.  Be humble enough to consider what the opportunity cost might be if you don’t get it right.  For example, let’s say you are entitled to $50,000 of the equity in the marital home.  Your soon-to-be ex is refusing.  Do you just slink away?  What if it cost you $3000 in attorney fees to recover the $50,000?  Was it worth it?

Here is another scenario: Married 9 years.  Lots of issues.  She stayed home with the kids.  He’s had a good career and income.  Both parties know they are eventually going to be in the divorce lane.  Do you pull the trigger now?  Well, did you know that under Social Security rules, a divorced spouse may claim Social Security benefits off a divorced spouse’s work record provided that they were married for at least 10 years?  Check out www.SSA.gov for more details here.

What else might you not know?  Suppose you desire that the marital home be distributed to you as part of a property settlement?  He is fine with that agreement, but there is still a mortgage on the property.  In order to execute on this, you’ll need to be approved to take over the mortgage based on your solo financial situation.  Do you have earned income?  If not, the lender may be willing to look at any child support, spousal support, or alimony you receive for purposes of qualifying you for the mortgage.  There are requirements, though; for example, the lender may want to see at least 6 months’ history showing you received those payments.  They may also want to see the agreement or order confirming that the cash flows are expected to continue for at least 3 years.   If he’s been simply paying some or all of the bills for the last 6 months, that is not viewed in the same light by the lender as if you had been collecting monthly support payments from him over the same period.  A misstep like this could delay your new chapter of life by another 6 months.

How about this?  Kids are grown and gone.  You both agree you’ve grown apart and have sought counseling sincerely to no avail.  You both agree you are in the divorce lane.  You also both agree you have no interest in paying some divorce lawyers enough to send them both to the south of France on holiday.  So, he says, “Let’s just work this out ourselves and save the money”.   He hands you a proposed list of assets to divide.

It may sound tempting to say ok if the numbers seem to roughly add up.  But what if, instead, you speak with an attorney, or a financial professional such as a Certified Divorce Financial Analyst CDFA® and you have the document professionally reviewed?  Important differences emerge.  A review of the proposal reveals that the assets in your column are all subject to income tax because they are retirement accounts.  Additionally, you may be penalized due to age.  What if the financial professional noticed that most of your assets are tied up in real estate which would need to be sold to free up cash?  What will it cost you to fix up the place, pay the realtor’s commission and pay the capital gains tax on the appreciation of property when you sell it?   What if the investments you’ll get are not liquid like an annuity, or more aggressive and exposed to risk of loss than what you might be comfortable with?

My point here is that when it comes to understanding how assets can be divided, we must be sure to compare apples to apples. What if you are not an apple farmer?  You can step forward confidently knowing that there are legal and financial professionals who are experienced in guiding women wisely through those decisions.

Yes, the journey over the bumpy sidewalk that is divorce has holes the unsuspecting can fall in, but not you.  The more you know, the better you will be at avoiding the holes as you navigate the journey.  The road that leads to your next chapter can be repaved for a smoother future, one of confidence, self-discovery, and anything you want it to be.

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