Divorce – Recession Style: Income and Expenses

Divorce is never easy, but add on top of the emotional trauma, the uncertainly of a recession, it gets more difficult.  The next few postings here will deal with some financial issues in divorce and how they’re impacted by our current economic landscape.

If both spouses are able to make ends meet comfortably on what they individually make after a divorce, income doesn’t really come up as a bone of contention.  But if they can’t, then alimony – also called spousal maintenance – becomes an issue.  In divorce cases involving alimony, generally every state looks at the reasonable income of each spouse and their reasonable expenses to figure out what the amount of spousal maintenance might be.  The word reasonable – for both income and expenses – is key.  If I’d like to leave my financial planning firm and try to become an actress, a judge probably isn’t going to require my ex to pay alimony to make that possible.  Also, the courts don’t generally want me to live a substantially better lifestyle than my ex if we’ve been married quite a while.  (All this doesn’t take kids into account.  More on that in a future posting.)  And most people, after a divorce, have to cut back their lifestyles since most marriages don’t have enough excess cash flow to support an entirely separate household. 

So on the earnings side of the equation, in this economy, some people are taking a pay cut or losing their job.  And people entering the work force aren’t having an easy time of it.  Divorce isn’t intended to be a free ride or windfall to either spouse, but courts also don’t want people to have to stay married to survive.  People who aren’t going through divorce are making some temporary compromises in their career paths.  They’re taking a job to get their foot in the door at a company they’d like to work for long term.  Or they’re taking a job they’d otherwise never consider to put food on the table.  So people in the midst of divorce realistically may have to make some of the same choices.  That may lower how much one spouse will pay in alimony, but that certainly doesn’t eliminate the possibility of spousal maintenance being paid.  This may also be a time when people who wanted the security of knowing the amount of alimony was locked into their divorce decree may want the flexibility of having it subject to modification if circumstances substantially change. 

Unreasonable spending levels are one of the factors that caused the recession.  So this is a great time for everyone – in or out of divorce – to get back to sanity in their expenses.  But it should be an equitable approach to cutting back.  It’s not reasonable to have one spouse living in the penthouse with a view of the park while the other is living in a cardboard box in the park.

Truly Resolved

I’m not anyone’s idea of an athlete, but I generally manage to stay on a pretty good year round schedule of walking.  During the months when the weather is reasonably pleasant, I walk outside.  During the winter, I spend most of my walking time at a gym the family belongs to.  Right before January 1, I asked one of the gym employees how long it usually takes for the New Years Resolution crowd to stop coming.  He said it’s usually in early February.  I love seeing new faces – and shapes – coming to the gym and enthusiastically attacking their fresh goals.  But that crowd does thin out every year and it’s depressingly early in the year. 

From what I hear, most new years resolutions deal with either health and fitness or personal finance.  That makes the fact that too many people drop their resolutions a few weeks into the year all the more distressing, because those are both areas that are important.  So what can people do to stay on track?  Let’s look specifically at financial resolutions.

First, make the goal achievable.  For instance, this might not be the right year to double your income.  Second, approach your goal in bite size bits.  So you might not want to completely eliminate your dining out budget.   But maybe you can have eating out be a reward for some other goal you’re working on or you can start by going to places that are a bit less expensive than you usually do.  Third, allow the new goal to become natural and habitual in your life.  If you want to monitor your spending more, make sure your system isn’t too hard to keep going. 

So do what you must to make your financial goals for 2010 achievable.  If you need some help, send your financial resolution to linda@brightleitz.com .  If your goal is one that would benefit more people than just you, the action plan will be part of this blog in coming weeks.