After Divorce: Building a Safe Financial Future

I received the text at 11:42pm on a Tuesday. I’d just finished getting laundry folded, and kid prep completed for the morning, when my text tone cut through the quiet. It was just a few words, “My god, it’s his high school girlfriend!” but it flashed me back to my own life, so many years ago. I knew all too well what the next year or more would look like for my good friend. We talked for a while by text, and in the end, she told me that her divorce would soon be final.

This could be any one of us because we’ve all either been that woman, had that friend, or more than likely, both. These are the major life moments when we feel forced to fight. We make enormous decisions about our children, employment, finances – yet, these are the absolute worst times to trust our fragile hearts and minds. Often, we’ve been raised with bad examples of how to handle conflict, and fear takes over. Fear does not help us make good decisions. In my line of work as a realtor, I help clients in all phases of their lives, including divorce. In this case, and with the goal of helping others, I’ll share a bit of my story.

Back in 2005, I found myself in the unhappy position of filing for divorce. Although I was educated and had previously held good professional positions, I had been a stay home mom since my son was born seven years earlier. I was terrified. My son was terrified. To be fair, I’m sure my then husband was also terrified. I remember collapsing onto the kitchen floor one evening well after midnight, crying so hard I couldn’t breathe. Where would I live? Could I afford a place to live? Would my husband try to take my son? What would I do with my horses? How could I have let this happen? What would everyone think of me? FEAR. Every day. Every night. Months and months of mounting fear. There seemed to be no end in sight. It was through this lens that I made the major financial decisions that would impact my life for many years to come.

My fear dictated that my son had to have a comparable house immediately. I used most of my divorce settlement money, approximately 90,000, for a down payment on a property I could not afford. I withdrew all the money from my 401k, incurring steep penalties, and built a small barn so I could bring my horses home. I secured a home equity loan, (interest at the time was just over 7%) so I could pay my bills while I got myself fully employed. At the time of this writing, I have four more payments on this loan – thirteen years later! These major financial decisions were made at the most emotionally charged time of my life, and they have made an enormous negative impact on my fiscal stability.

In preparation for this article, I reached out Edythe M. De Marco, CFP ®, of the De Marco-McCarthy Group, Merrill Lynch, Providence, RI, for suggestions that will help anyone, but especially women, plan their financial way through a major life change. Edythe shared this advice, “Seeking the advice of an experienced Certified Financial Planner™ (CFP®) would be my recommendation right from the outset.  Any woman contemplating divorce, or one in the process of divorce, can best prepare herself for the next chapter in her life by seeking the advice of a trained professional who can help her prepare a net worth statement, budget and cash flow analyses, which would factor in both taxes and inflation.  By going through a “financial stress test” analysis like this, she would be empowered with the knowledge to best prepare and care for herself and her family. Our team conducts these types of analyses, as would most CFP®’s.” Edith also offered a downloadable guide to financial stability specifically designed for women, which you can download here: Women & Wellness

Four tips to help you build a safe financial future:

  1. Break the taboo around money talk. Encourage conversation between friends, family, and financial professionals, and in the press and in schools. Seek mentors and learn more about money and finances. This is an area where women especially have gaps in experience.
  2. Turn longevity into an asset. Start a retirement plan as early as you can, take advantage of tax-efficient retirement plan options such as 401(k)s that provide the opportunity to grow with compound interest, work longer, if possible and maximize Social Security and pension benefits.
  3. Acknowledge financial challenges that impact women. These can include career interruptions, longer lives to fund, or increased healthcare costs. Save and plan for these eventualities. Every little bit makes a difference.
  4. Plan early and often. Consult a professional, discuss life priorities and goals, create a plan that matches any unique circumstances and revisit that plan often and make course corrections along the way.

As a realtor, I meet people who are buying and selling homes at various stages of their life. When I meet someone going through the divorce process, especially a woman, I always try to help them process more than just the buying and selling of their home. If I’m able, and it’s appropriate, I give them resources that can position them for a future of financial success, rather than the hardship and rebuilding I endured.

I’m grateful that I was able to raise my son on that little farm and build an amazing career at the same time. Even so, my finances will never be what they could have been if I had worked with a counselor and a certified financial planner to help me process my fear and make a solid financial plan. If you are going through any heavy life change, find a team to help to ensure you have a solid financial plan. It will secure your future, empower you emotionally and make you stronger.

Kimberly McHale is a real estate agent with Mott & Chace Sotheby’s International Realty and works with buyers and sellers state-wide. She is also a professional vocalist and an avid equestrian. Email: 401.692.1644