Divorce can have different impacts on men and women. Even though we live in a society where the majority of couples both work full time, men still tend to earn more than women, and women still tend to spend more time caring for the children, particularly after divorce. Given these realities, women need to consider a variety of financial issues at the outset of a divorce, as this article summarizes.
First, who will retain the marital residence? Many mothers principally caring for the children would like the consistency that goes with keeping the marital home, as it lessens the impact of divorce on the children. However, many single moms may find paying for the marital residence a challenge. The single mom will have to refinance the mortgage on the home, which may prove daunting without sufficient income. The single mom will have to determine if she can afford the monthly mortgage, taxes, insurance and upkeep on the marital home. Consequently, before deciding to fight so hard for the marital home, the single mom will want to consult with her lawyer and perhaps a financial advisor to determine the minimum income necessary to keep the house and whether her income, plus child support and maintenance, could sustain the home. And even if it could, it may make better financial sense in the long term to sell the marital home and downsize. All these considerations should be worked out before negotiating for the marital home, as it will affect bargaining positions on other key property and support issues.
Second, how much will the single mom receive in maintenance and child support? In Missouri, child support calculations begin with a set of guidelines that produce a presumptive child support amount based principally on the incomes of the parties, the health insurance costs and the work-related childcare expenses. A court can find the amount unjust and inappropriate and deviate above or below this presumptive amount, but the court would need sound reasons and evidence to do so. Therefore, a single mom should begin budgeting based on her income and the presumptive child support amount. With regard to maintenance, if the single mom cannot meet her reasonable needs through full time employment and her share of the marital property, the court can handle the shortfall by ordering spousal support. However, spousal support has an upper limit in that courts will not take more than a certain percentage of the paying spouse’s net income. Based on these parameters, the single mom will need to budget for the future and try to slenderize expenses so that saving for the future may continue.
Third, who will handle marital debt? Every marriage accumulates assets and liabilities, and that includes everything from auto loans to credit card purchases to student debt. The single mom will want to minimize her responsibility for marital debt given the likelihood she has less income moving forward. Also, the extent to which she can pay for this debt will affect her credit rating, which can have a negative domino effect if she falls behind in payments. Also, carrying credit card debt only lowers real income over time because of interest payments. It may well be worth trading certain assets or other “wants” of the other spouse to avoid the marital debt.
Fourth, what marital property will help me start fresh without a significant outlay in new purchases? Whether keeping the marital home or downsizing, furnishing living space without having to buy lots of new items is the most desirable short term financial strategy, so identifying those items and negotiating for them in settlement negotiations should be important.
Finally, who will get what share of retirement funds? Any retirement benefits accrued during the marriage are marital assets, but the single mom should want to angle for a greater share of these benefits. Why? Because over the long run the single mom will earn less than the ex-spouse and will have less saved for retirement and for Social Security. Negotiating for a greater share of retirement funds can secure the ability of the single mom to have a nest egg come retirement.
As you can see, single moms have certain key financial issues to consider that affect both short term and long term financial health. Any divorce strategy for the single mom must take these issues into account prior to negotiating a settlement or the single mom could find herself in financial straits.
If you have questions about divorce as a single mom, contact us – we can help.