Most couples are characterized by economic hardship during a divorce as the income which supported the marital household has to be extended in the sustenance of the spouses’ separate households. Even though both spouses are affected by a lowered standard of living after marital dissolution, research shows that women are more economically vulnerable than men during the divorce transitions (Fine & Harvey, 2013). Women bear a disproportionate share of costs resulting from a divorce, and these effects are more pronounced for custodial mothers and Black women (Wolfinger, 2005). Demographic data among all women indicate that divorce is most common in women who are least able of maintaining a separate household (Fine & Harvey, 2013). Furthermore, these economic effects of divorce are deleterious to economic security are often attenuated until remarriage.
Financial management strategies for women faced during divorce transition are necessary due to various reasons. Firstly, research suggests that divorce has become increasingly normative. According to a literature review by Howe 50% of first marriages and 60% of second marriages end in divorce. Secondly, divorce is a precursor to women’s poverty (2012). Data from the U.S. Census Bureau (2010) show that 29% of families where women are the heads live in poverty. The disadvantages for a single mother are often an economic consequence of divorce. Therefore, financial management education that provides effective strategies for countering economic challenges due to marriage dissolution may ease women’s transition to divorce and greatly benefit those who are economically vulnerable.
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For most women, divorce comes hand in hand with economic stressors. Women with children suffer more and also recover from the setbacks slower than those without any younger ones (Wolfinger, 2005). Similarly, poorly educated women and those with few marketable skills are less resilient to this economic downfall than their well-educated counterparts. However, economically fragile women are the ones who are most prone to divorce and end up suffering immediate and extended consequences (Gottman, 2014).
Immediate Economic Effects
The immediate economic effects can be explained by three primary factors. First is that both spouses will be forced to care for all household duties, a situation that results in purchasing services that were previously being rendered by one of the spouses. The economic benefits that were enjoyed through sharing a household will also be lost. Lastly, women lose institutional access like health insurance. Women who remain in their marital households experience unchanged fixed household expenditures but a reduced income for meeting these expenses (Fine & Harvey, 2013).
The years following the divorce transition is often characterized by a slow recovery to the pre-dissolution financial status. Women do this by improving their personal earnings, availing themselves for tax advantages extended to a non-marital status, and receiving child support. Additionally, remarriage is also associated with an economic recovery (Fine & Harvey, 2013).
Extended Economic Effects
Unlike the immediate period following the transition to divorce which is marked by economic recovery, the same is not reflected upon retirement. Divorced women, especially those whose workforce participation was truncated during marriage are less likely to enjoy adequate individual retirement savings or employer-sponsored retirement benefits. Complex marriage histories also have detrimental effects to a divorced woman’s Social Security Retirement Benefit.
Interventions for Women Undergoing Divorce Transitions
Enrolling divorcing/divorced women in educational intervention programs can be a challenging task because of the additional pressures these women experience. Employment, housework, errands, childcare among other activities are significantly undermined by divorce due to financial and time constraints. With this in mind, extension educators should involve the affected women in consultations during the planning phase of the programs (Wolfinger, 2005). Their feedback will be of great value in the tailoring of the programs to meet the women’s scheduling needs. The financial education setting should also act as a support group for the affected. The building of quality relationships with participants is essential in retaining their commitment and interest in the program.
Intervention programs for divorced/divorcing women should be designed in a manner that considers and focuses on certain key areas. Professional financial planners stress that such women require assistance in areas of debt management, budgeting, the division of marital assets, and estate and retirement planning. Other areas that they may be in need of help are on daily conservation strategies such as reduction of living expenses and effective day-to-day financial practices (Fine & Harvey, 2013).
Programs that meet the needs of the affected women can go a long way into reframing the stresses associated with divorce. According to research, women are more likely than their male counterparts to seek out avenues of stress-related support (Howe, 2012). Women’s response to financial setbacks brought about by divorce are often involved in certain activities such as returning to school, discovering new careers, retooling the jobs’ skills-set, and embracing their new financial (Gottman, 2014). Extension educators are therefore uniquely positioned to providing women with strategies that will facilitate their swifter recovery as well as reframing stresses into opportunities for professional and personal growth.
Adaptive Budgeting
Since the transition to a divorce may involve a reduction in household income and unchanged fixed expenses, adaptive budgeting can be very useful. Transitional cash-flow deficits can be effectively addressed through dual approaches that entail reducing expenses and increasing cash inflows (Fine & Harvey, 2013).
Women will largely benefit from extension education which helps them in identifying overlooked opportunities that will increase their income. Those who are deployable may work for more hours, seek better pay alternatives, or supplement their income with home-based businesses that require no capital investments like gardening for a neighbor, or providing weekend childcare. Other revenue avenues may also be considered such as having garage sales or leasing out a portion of the farm or home. Moreover, women with employment may adjust their income tax withholding in accordance with their post-marital filing status, a move that will increase their net pay.
Effective extension education is pivotal in making the affected women aware of any public benefits they may be eligible to. Sadly, most of them fail in taking full advantage of public assistance. Moreover, women may seek relief from various sources, including community resource groups, family members, charitable organizations, and social service agencies.
Reducing expenses can be done by adjusting expenditures that are not fixed. By placing these discretionary expenses in order of necessity, elimination of the least important can be done. However, expense reduction will be accompanied by adjustments in lifestyle expectations. Transitional budgeting should be followed by enrollment in a private health care plan for women who are ineligible for Medicare or Medicaid (Fine & Harvey, 2013).
Skillful Negotiation in the Division of Marital Assets
Women undergoing divorce transition should be encouraged to enlist the services of a divorce attorney. This is because negotiations concerning the division of marital assets necessitate a careful identification and evaluation of all marital assets, inclusive of pension benefits and retirement accounts.
In negotiations with regards to maintenance payments, alimony and child support should be correctly identified. Child support attracts no income tax consequences. This is however not the case when it comes to alimony, payments and receipts are deductible by payers and taxable to recipients (Fine & Harvey, 2013). It is important for women to also address future support obligations of children education funding during the negotiations.
Protection of future alimony and child support awards may be protected by insuring the life of a former husband. The woman should own the policy to safeguard it from lapsing as a result of premium nonpayment.
Lastly, in situations where marital assets may be sold, women should evaluate the tax liabilities associated with the sales. For instance, the tax liability associated with selling assets reflects the means of acquisition, asset type, holding period, and cost basis (Wolfinger, 2005). Therefore, it is advisable for women to consult tax accountants where post-dissolution sales may occur.
Management of Post-dissolution Debts
Prioritizing the payment of secured debts over unsecured ones minimizes the risk of foreclosure Moreover, restructuring debts where possible may lower cash outflows as it may reduce their interest rates or increase the period over which repayment is made. Assistance from a Consumer Credit Counselling Service may prove to be crucial during this process (Fine & Harvey, 2013).
In the event of a divorce, both spouses may be liable for formerly joint debts. Due to this, women are advised to close joint credit cards. When a joint account must remain open, and the former spouse is responsible for making payments, women should ask for a duplicate monthly statement to make sure that their creditworthiness does not get damaged by their previous spouses’ delinquencies.
The use of credit cards by women in divorce transition for the financing of living expenses should be discouraged. Instead, it is recommended that they establish independent credit. There are various avenues in which recently divorced women can show their independent creditworthiness. They include accounts with local merchants, utility bills, and credit unions. The affected women should also embark on the periodic monitoring of their credit score and credit reports.
During a marital dissolution, both spouses experience economic adjustments. However, women are often more economically vulnerable than their male counterparts. The three management strategies identified earlier, adaptive budgeting, skillful negotiation in the division of marital assets, and management of post-dissolution debts largely empower women during this transition. Although divorce may be seen as a time of emotional and economic upheaval, the process does not present only challenges but opportunities as well.
References
Fine, M., & Harvey, J. (2013). Handbook of Divorce and Relationship Dissolution . Hoboken: Taylor and Francis.
Goldsmith, E. (2013). Resource management for individuals and families (5th ed.). Boston: Pearson.
Gottman, J. (2014). What Predicts Divorce? . Psychology Press.
Howe, T. (2012). Marriages & families in the 21st century . Malden, MA: Wiley-Blackwell.
U.S. Census Bureau citizens' report . (2010). [Suitland, Md.].
Wolfinger, N. (2005). Understanding the divorce cycle . Cambridge: Cambridge University Press.
