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.