When an Ohio couple confronts the question of whether to divorce or dissolve their marriage, a great many matters that have to be addressed. Regardless of the route pursued - legal separation, dissolution or contested divorce - there are going to be emotional stresses. Equally worth acknowledging is that there will be financial stresses, too.
Those with deep experience in this area know that overcoming the hurdles requires knowing what to anticipate and having a plan for meeting certain challenges. Perhaps the greatest of these is the fact that divorce is likely to leave both parties reeling for a time as they try to work out how to live in two separate homes on the same amount of income as when they were married. What follows are some financial planning suggestions to better prepare.
Create a budget and follow it
Money experts have been saying for decades that average Americans don't save enough. This can have a real effect on you after a divorce. As a counter measure, commitment to creating a realistic budget is essential. It should be based on clear needs rather than wants, recognizing that you're required to operate on reduced income.
Decide on keeping or selling the house
There was a time when "getting the house" represented a major financial gain for whoever took possession in divorce. That's more often not the case today. If a spouse takes the house, it may require buying out the other spouse or giving up some other marital asset. Other options might include:
- Selling the home and splitting the proceeds if the market is good
- Renting the home at a rate to cover the mortgage if the market is bad, until things improve
- Selling the house at a loss, sharing the loss and moving on
- Giving up the home through a short-sale, foreclosure or bankruptcy
- Bird nesting - a parenting model where the home is kept, a nearby apartment is rented and the parents alternate living between the two residences
So-called gray divorce is becoming more common. If a couple has been actively planning for their retirement years, they need to examine how divorce will affect those plans. Immediate needs can't be met by a pension that doesn't start paying for 15 years. Some offset to make up for the difference might be called for.
Clearly, to avoid costly mistakes, enlist the right team of professionals.