By Diane C. Pappas, CDFA
Be in Control of Your Finances Post-Divorce
It is a known fact that a woman’s standard of living may drop significantly after a divorce, while a man’s standard of living either remains the same or increases. The reason for this is simple – there is just not enough money to support two households at the same level that once supported one household, and if there are children involved, the custodial parent seems to carry a greater portion of the child-related expenses than the non-custodial parent. Since eighty percent of the custodial parents in America are women, it would make sense then, that a woman’s standard of living is affected at a greater rate than a non-custodial father’s.
A divorced woman’s standard of living, according to one often quoted study, indicates a loss of 27%, while a divorced man’s standard of living may increase by 10%. The drop for women can actually be much worse too, maybe by as much as 50%.
Sustaining this amount of loss for several years can have a devastating impact on a woman’s ability to survive financially. The old saying of ‘ending up bag lady’ is a real concern and fear among many divorced middle-aged women. I know this to be true, because I felt it too.
What can you do after a divorce to ensure that you do not ‘end up like a bag lady’?
Take control of your expenses, so they don’t take control of you.
Real Life Examples
After my divorce, when I realized I did not have enough money to pay the bills, I went on a rampage to find ways to cut back.
The first call I made was to Verizon to see about reducing my cable/internet/phone bill. Turns out, that once I told them I was recently divorced and that my bill was too high, they were willing to work with me. They reduced the bill by $20, no questions asked. That may not seem like a lot of money to some of you, but it can add up. Do that for all your bills, and the savings can be substantial. It’s an empowering experience to take back control.
I also called my waste disposal company and found out that if I took a smaller garbage receptacle, I could reduce my bill by half! They don’t tell you that in writing anywhere, but all you have to do is ask.
Just yesterday, almost five years since my divorce, I was reviewing a credit card bill. I saw a charge on there for $18.20 and since I did not have a balance and hadn’t made any purchases, I was very curious as to what this was for. Upon calling the credit card company, I found out this was for a credit protection plan that I never signed up for! And the worse part was, I had been paying for this since 2010. How did this happen? I was livid, how did this get by me? Oh well, divorce happens, and I cancelled it, thereby saving me $218 a year.
Strategies for Reducing Expenses
- Call all utility companies (Verizon, Comcast, NStar, National Grid) and see about reducing the monthly cost or getting on a monthly installment plan so bills that are high for part of the year (like gas/oil) can be converted to a smaller fixed payment spread over 12 months;
- Install programmable thermostats to control heating costs;
- Reduce Homeowner’s and Auto Insurance premiums by using the same insurer – can save up to 30%;
- Review all credit card statements and look for anything you may be paying for that you didn’t sign up for, like ‘Credit-Pro’ or a credit protection plan;
- Make sure your cable provider is only charging you for services you actually use – cancel HBO and Showtime if you never watch them;
- Be aware that some phone providers charge for a PC virus protection plan that you do not need if you have a Mac;
- Do your own house cleaning for a while and get the kids to help;
- Cancel magazine subscriptions if you never read them;
- Check ‘auto-pay’ and ‘auto-renew’ services that are debited on a monthly basis, but are no longer needed;
- Adopt a new philosophy about spending – do not be impulsive – buy only what you truly need and not what you just think you want.
The Grocery Bill and Dining Out
One word about this category of spending: Whole Foods and Starbucks will put you in the poor house if you don’t watch out. Our country is fixated on eating healthy and buying only organic products. While I feel this a great trend to be on, we all know how expensive it can be. Cutting back temporarily, until you have extra discretionary cash, may be the number one way to cut back on current spending. Buy basic goods in bulk, and don’t discount generic products. Brand names have big markups. The rule of thumb of $100 per person, per week, is TOO high for most households.
The same goes for dining out. Limit dining out to once a month, for now. Take left overs to work for lunch. Buy fresh food and cook at home. Reinstitute eating together at the kitchen table a couple times a week.
Be Empowered, Be in Control
In a previous post I wrote about the ‘Top 3 Things You Need to do After the Divorce’. The recurring theme is to take back control of your life. Once you discover your financial reality and accept it, you will be empowered to move forward and you will feel good about yourself and your new life. Reviewing and reducing your expenses on a monthly basis for the first couple of years is imperative. I speak from experience. My standard of living dropped after my divorce, but I accepted it and took control. I am happy and content now, with no more fears of ‘ending up a bag lady’.