Within a marriage, a man and a woman’s financial circumstances are generally pretty much equal. But if a divorce occurs, the woman’s situation tends to be somewhat more challenging than that of her ex-spouse. And that’s why, during this major life transition, you may want to meet with a professional financial advisor to go over your spending needs and your cash flow, so that you know what you absolutely need today — and how you can plan for tomorrow.
But before we get into some possible steps you can take, let’s look at some of the reasons that women may fare worse than men, financially speaking, following a divorce:
• Lower income — The average woman’s family income drops by 37 percent after divorce, according to the U.S. Census Bureau. And in many cases, divorce exacerbates a situation in which women were already trailing men in earnings. In fact, women still only earn 77 cents for each $1 earned by men, according to the U.S. Bureau of Labor Statistics.
• Smaller retirement accounts — The average balance on women’s defined contribution plans (such as 401(k) plans) is only 60 percent of men’s average balances, according to LIMRA, a financial services research organization.
Of course, “averages” are just that — averages. But whether you recognize yourself in the above numbers or not, consider these suggestions:
• Create an emergency fund. Try to put six months’ to a year’s worth of living expenses in a liquid account.
• Contribute as much as you can afford to your retirement accounts. Even if you will eventually receive some of your ex-spouse’s retirement funds, you need to take full advantage of your own savings opportunities — because it’s pretty hard to save “too much” for retirement.
• Rebalance your investment portfolio. If you are now investing for yourself, you’ll want to take a close look at your asset mix to make sure it is appropriate for your situation.
• Above all, get some help. As mentioned above, now is a good time to meet with a financial advisor. A trust company’s services can prove especially valuable to you and your family should you ever become incapacitated.
Unfortunately, a divorce may leave you feeling “at sea” in many areas of your life. But by following the above suggestions, you can at least help keep your financial ship in calmer waters.
• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Kim DeVoss, CFP. Reach her at (480) 785-4751 or Kim.DeVoss@edwardjones.com.