- My divorce was more amicable and less stressful than many, but even so, it was chock-full of unexpected financial landmines.
- I’ve learned that everything is more expensive when you’re single, from taxes to insurance to your phone service.
- Not only does spousal support leave me without disposable income, but the division of assets torpedoed both of our retirement plans.
- Here are the biggest surprises I wish I had known before we started our divorce.
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In a few months, I will pass one of the sadder milestones in my life – I’ll have been divorced for about two years. After a 30-year marriage that spanned my entire post-college adult life, I’m still not used to the idea of being single again.
My wife and I split amicably, opting for a mediator rather than a lawyer, which saved us an enormous amount of money. We sold our home without much trouble and divided the relatively meager equity between us. We each already had a car – both were in my name, so I transferred my wife’s title to her. She moved away, to be closer to our grown kids. I moved a shorter distance, into an apartment in the heart of Los Angeles.
Life after divorce has been full of surprises. Everything from becoming my own accountant again after my wife paid the bills every month for decades, to doing my laundry and all the household chores has been an on-the-job learning experience for me. And while I thought I was headed into the divorce process fully aware of the financial implications, the reality of divorce still manages to catch me off guard, again and again.
Here are eight things I wish I had known before I got divorced.
My federal income taxes will be a lot higher this year
This is one of those things that I knew intellectually but hadn’t really internalized until recently. After all, I haven’t filed taxes as an individual since I was fresh out of college. Virtually all of my tax returns had the “married filing jointly” box checked, and I could take advantage of the somewhat more generous deduction for families.
For this year, I ran an online tax calculator to see how my tax exposure was likely to change. Plugging in an estimated $US60,000 income and a few other hypothetical values, I ran the maths twice, comparing married filing jointly to filing as an individual.
The result? My liability appears to be about $US7,000, nearly twice what it would be before the divorce, all other things being equal.
Spousal support is a distressingly large chunk of my income
Let me be perfectly clear: I am not complaining about having to pay spousal support. For 30 years, I was either the sole or principal breadwinner in our household, and consequently, my wife never needed to pursue a career. Now that she does need to pay all her bills, I need to help out.
But during the initial meetings with the mediator and through the majority of the divorce process, I didn’t give a lot of thought to what the spousal support agreement would actually be.
It turns out that the judgment is a lot of money, relatively speaking – about 20% of the take-home pay I was earning at the time of the divorce. As someone who probably doesn’t think hard enough about budgets, saving, investment, and retirement, it only became apparent to me when I started writing those checks after the divorce that this money accounts for virtually all of my disposable income.
And since I’m now a freelancer without a 401(k) quietly building equity in the background, I’m worried that I am not going to be prepared for the retirement age that’s rushing towards me like a speeding train.
To change your support agreement, you have to pay to go back to court
Your mileage may vary. If you’ve only been married a few years, spousal support might only last a few years – enough time for the lower-salaried spouse to get back on their feet and start a career. But we were married 30 years (just slightly longer than “The Simpsons” has been on the air), and that means, in the eyes of the court, that I’m obligated to pay support indefinitely.
Of course, the terms can be modified. If my wife were to remarry, start earning more money than me, or win the lottery, we could head back to court to revise or terminate the agreement. But that’s expensive, time-consuming and is sure to open old wounds. Or, more likely, aggravate raw wounds that are unlikely to ever heal properly.
So it’s unlikely I’ll ever request any changes to the spousal support agreement – I will do my best to pay the amount, even though it was based on a salary I no longer have. The only reason I’d ask for the terms to change is if she really does win the lottery.
Everything is a little more expensive
When you’re married for a long time, you stop thinking of yourself as an individual and more as a unit – a two-person team. At least, that’s more or less how my wife and I had approached life. That doesn’t just apply to attending dinner parties and deciding where to go on vacation, but to routine expenses and purchases as well.
Take the phone bill, for example. For years, we’d been on a shared plan with AT&T that cost $US40 per line. Investigating equivalent plans at the same data level, single-line plans start around $US60. For now, we’re simply keeping the family plan. But if my wife chooses to switch to another carrier, I’ll need to spend more for the same service, just because I’m single.
I’ve found the same is true for other expenses as well. Auto insurance, for example, has gone up significantly. As a married couple, our auto insurance benefitted from a pair of discounts – a multi-car discount ($US35) and a multi-policy discount ($US55). Each six-month premium was reduced by $US90 for the two cars. Now, I’m only paying insurance for one car, of course, but with both of those discounts gone, I pay about 25% more.
Even when the split is amicable, it’s crazy expensive
Because we opted for a mediator and never had to get lawyers, see a judge, or spend time in court, our divorce was no doubt a relatively painless experience.
But everything is relative. The experience was relentlessly, soul-crushingly sad, and nearly two years afterwards, I honestly still haven’t stopped grieving.
Even so, if there was any upside to all that, it’s that we were able to save a substantial amount of money by working with a mediator instead of a lawyer. When I consulted with lawyers before filing divorce paperwork, I was advised to reserve $US15,000 for legal fees. In reality, it cost just about $US5,000 instead. Yes, that’s only a third of the initial estimates, but even so, it’s a lot of money when you don’t have a ton of liquid assets in the checking account.
Moreover, that was just the start of my overall divorce expenses. Apartments aren’t cheap in Los Angeles, and when you factor in the first month, last month, and security deposit, I had to write a check for almost $US7,000 on the day I got the keys to my new apartment – a very bad day for my checking account.
My wife and I split a lot of the furniture and other household items, but starting out as a newly single guy for the first time in 30 years is sort of like being born – you are starting fresh. Kitchen table, silverware, dishes, a TV, bathroom supplies, a mop – there was almost no end to the mundane things I had to buy in my first few weeks on my own. I was a daily visitor to Target and racked up several thousand dollars more in completely unexpected expenses.
There’s no one to share financial challenges with
Now that I’m single again, I sometimes wonder how people who choose not to marry at all get through life all on their own. Looking back on my marriage, I think some of the best parts were when the two of us could stand back to back, metaphorical weapons in hand, and tackle the fiercest monsters that life could throw at us, like a superhero team in a Marvel movie.
That meant a lot of things in practice, but one of the most important was that we had each other’s backs financially. If the car had a $US1,000 repair bill that my paycheck couldn’t cover, her salary was there to fill the gap. And if I lost my job, there was no way my wife could pay all the bills with her relatively small salary, but her contribution was a valuable buffer against insolvency.
Now, not only am I the sole earner in my single-occupant apartment, but I’m obligated to provide spousal support as well, further reducing my available funds. When I was laid off a few months after our divorce was finalised last year, I went from a full salary to zero income with a meager one-month severance package to serve as a cushion while I tried to figure out my next steps.
In the old days, my wife would have been there to help. No one tells you that after a divorce, no one has your back.
Your retirement plan is completely capsized
As a married couple, we were by no means wealthy, but between various investments and a couple of 401(k) accounts, I was moderately impressed with how much we had managed to accrue for retirement, almost by accident.
According to our financial planner (a free benefit from being a USAA member), we were roughly on track for our retirement goals. That was great news, since my 10 years in the Air Force contributed nothing towards retirement, and I regret squandering a number of high-income years after that with little or no retirement savings.
Unfortunately, the divorce derailed all that progress. Dividing my 401(k) and other investments in half, what remains in my bank account is far less impressive and will run out distressingly fast when I need to start drawing on it in retirement. Divorce has moved a worry-free retirement well out of reach.
Both spouses should have credit in their own names
As a married couple, virtually all of our assets, credit, debt, investments, and savings were either in my name alone or shared in both of our names. Only during the divorce process did we learn how bad of an idea that turned out to be.
Of course, if you never divorce, it hardly matters. But my wife quickly found that she was unable to get a credit card or other lines of credit on her own – she had no meaningful credit history. It was heartbreaking seeing my wife, who had decades of solid credit, have to get a secured credit card just to be able to make purchases when we divided up our banking and finances.
The takeaway? Even if you’re not planning for a divorce – and honestly, who is? – both partners should build their own credit history through the life of the marriage with their own credit cards, car loans, and bank accounts. That way, if it becomes a necessity, both people can move on financially with confidence, and without humiliating hassles from the bank.
- Read more:
- My divorce cost me $US17,695 – these were the most surprising expenses I faced
- The 12 biggest money-related reasons people get divorced
- How to protect your money when marrying someone who’s in legal or financial trouble
- 12 things you didn’t know you could write off on your taxes if you work from home
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