Financial success following a divorce

As originally appeared in The Jerusalem Post on July 19, 2024.

“He taught me housekeeping; when I divorce I keep the house.” – Zsa Zsa Gabor

A few days ago, I was trying to organize my desk. I specifically said ‘organize’ and not ‘clean up’ because my desk is the definition of organized chaos. It’s not clean by any means, in fact, you may say that it’s a mess, but there is a method to the mess. I happened to find a pile of business cards. That already indicates the last time I tried to straighten up! Do people even use business cards today? I stumbled upon a card of a cab driver that wanted me to use him for ‘a special’ whenever I needed to go to the airport. I never used him, but I had written a few notes on the card, and I started thinking back and remembered the story.

A few years ago, I was in his taxi and as is usually my custom I started chatting with the driver. Our conversation was interrupted by a call from a female cousin of his that recently got divorced. As the call was on the loudspeaker and of course this being Israel, I heard everything. After he hung up, he started telling me how she was struggling to cope financially since the divorce, and that he was helping her out trying to get organized. I told him that I am a financial advisor and that unfortunately, I help advise divorcees to become financially independent. I gave him a few tips and after he thanked me and mentioned like 5 times that it was a miracle that I was in his cab at the same time his cousin called.

I have been counseling a recently divorced woman, to help get her back on firm ground financially. She was married right out of high school and never lived on her own. After some initial insecurity, she has become highly motivated to become financially independent for the first time. Part of what motivates her is to stick to her ex, as he made some cruel comments about her never being able to make it without him.

Here are some of the money tips that she is using to help get on solid financial footing. Before you send me the hate mail, these tips apply equally for men. It’s just that still while statistically divorce impacts both spouses, it’s more negatively impactful financially on women. If you are currently going through a divorce, family lawyers Melbourne can help you navigate the process and protect your interests.

Take Stock

The first thing a divorcee needs to do is get her hands around the budget. This is the first step towards financial empowerment. Many clients have told me that by doing this relatively simple exercise, they feel that they gained a level of financial control they never assumed they would have. Whether you kept a budget while married or not isn’t relevant. You are going to have a whole new set of expenses and will probably have different sources and levels of income than you had previously. Break your expenses down to those that are monthly and those that are annual, one-time expenses.

Once you have that organized, write down all of your various sources of income, salary, child support, bituach leumi…etc. What’s important in budgeting is to let your income drive your expenses. This means that once you know how much money enters your bank account each month, create a budget that limits your spending to the amount of income you have. While this seems basic, most individuals let their expenses drive the process, meaning that they spend money without discipline and hope that at the end of the month they don’t go into overdraft.

Understanding your budget can also play a major part in the asset division during your divorce proceedings. A well-known family law expert once told me that much aggravation and time would be saved if women knew how much money they needed to live off of. With this information, women can avoid spending years and thousands of dollars fighting for every last penny. If you know how much you need to live, you’ll know how much money to ask for.

Invest Lump Sums

As part of a divorce settlement, many women come into large lump sums of money and have no idea of what to do with it. It’s important that this money is used to help meet any financial goals that you may have. If after doing your budget you see that you will need more income to make ends meet, then you will want to make sure that your money is invested in a way that can maximize the amount of income produced, while preserving or even growing your portfolio.

Take Charge

As I have written previously, this new situation is actually therapeutic. According to Family Mediator Kathleen O’Connell Corcoran, Ph.D., “After divorce, women experience less stress and better adjustment in general than do men. The reasons for this are that (1) women are more likely to notice marital problems and to feel relief when such problems end, (2) women are more likely than men to rely on social support systems and help from others, and (3) women are more likely to experience an increase in self-esteem when they divorce and add new roles to their lives.”

Use this newfound independence and take control of your new financial reality. Speak with a financial advisor and create a plan that will enable you to get on with your life and be financially independent.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.

Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.