Hello! We are going to attempt to have fun and talk about something that typically that fun to talk about. I’m talking about the “D” word! Yeah, not that “D” word! I’m talking about Divorce. Some of these topics may get heavy.
We’ll do our best to talk about divorce, and the journey I took to reach financial independence following my divorce.
We’ll start with going through some stages of divorce. These are feelings, moods and things we experience while going through divorce. Now, if you, or someone you know have been through, are currently going through, or maybe thinking about divorce these are some of the feelings experienced.
We’ll then set the stage for my journey with a look at my background and where I was at when I started my FI journey. We’ll also explore the timeline, and some of the significant steps along the way.
Then, we’ll wrap-up with a look at some key things to think about if you, or someone you know maybe going through, or thinking about divorce. These are some financial considerations that can, hopefully, help you along the way. Help with making decisions and set you up for success.
The State of Divorce In America
Divorce is still a thing! According to the American Psychological Association approximately 50% of first marriages end in divorce. This typically last about 8 years or so. The divorce rate is even higher among those married for the second time. Upwards of 67% of second marriages end in divorce. Yikes! Imagine those first marriages in which they spend thousands of dollars on one-time event that doesn’t last, or ends only after a few years. Anyway, this equates to around 2.2 million marriages with around 830,000 that ended divorce in the year 2019. That’s a lot of people that experience anxiety, stress and money issues caused by divorce. It can cost a lot of money and headache going through this. The average legal fees associated with divorce is around $11,500. And that can be on the low end if the divorce if contested. We’ll talk about that in a bit.
I do want to acknowledge that not all divorces are bad. You could be getting out of abusive relationship. There could be toxic situations that are just better to end and get out. Please if you or someone you know feels they need help reach out to the National Domestic Violence Hotline.
Why Do We Get Divorced?
There are so many reasons why people get separated and end in divorce. One of the things we often year is the number one, or top reason people split is because of money problems. Actually, this isn’t the case. The number one cause is communication. We all hear, communication is key to a good relationship. This is so true. It is so important is establish good and open communication with your spouse or partner. This builds a strong foundation, trust, and an understanding how each of you need to be heard throughout the relationship. Money issues or money problems are actually number three on the reasons why we get divorced. Proceeded by Infidelity at the second reason marriages end.
The Stages of Divorce
There are series of feelings, emotions or stages those go through while experiencing the ending of a marriage. Here are some stages that we may experience. This isn’t a linear path, and sometimes these come and go, then resurface again. But in general these are the stages. Similar to grief, when someone passes. In essence you are experiencing the loss of the marriage. The primary stages of divorce are:
Denial – We often avoid even talking about divorce. We may invest heavily in the marriage at this time.
Anger – This is where we get mad and often blame the spouse for everything. We blame the spouse for past problems, the current situation. You may be blaming them for problems that haven’t even happened yet.
Bargaining – When we are in this stage we try and do anything to save the marriage or make things right again. I did this! I was trying to bargain. I’ll leave my job, and not travel as much.
Depression – There does come a time when sadness associated with the realization this is going to happen. This may be a good time to speak to a therapist to help navigate and cope with these feelings.
Acceptance – At some point we come to terms with the inevitable and we accept that this is happening. We then begin to establish our new identity. An identity as a divorced person. An ex-spouse, or a single parent.
I also add a couple other stages that may be overlooked.
Shock – This is a period of disbelief we may experience especially in the beginning. We often float back and forth between numbness and panic. We keep searching for reasons “Why” this is happening. This time can be dangerous. This is why therapy can help. But also we don’t want to make any knee jerk or rash decisions while we are not thinking clearly. Especially financial decisions.
Rebuilding – We’ve accepted this is what is happening. Our new identity. We now can find a way forward With hope, optimism and happy, healthy future.
We’ll focus on my journey to FI now. This is my Rebuilding story as I moved forward after divorce.
The Beginning Of My Rebuilding Journey
I was married for about fifteen years, and together for about nineteen years. I guess you could say high school sweethearts. Being that we met at ages 16 and 18, and I had just started college, and she was still in high school.
My wife has always handled the finances. For years, she balanced the checkbook, paid the bills and handled all the money issues. The only time I got involved was when I asked If I could buy that newest Mac, iPod or Technology. I didn’t want to know how much money we had, or didn’t have. Money was scary for me. I didn’t want to know how much we spent on groceries.
When my wife decided to leave, I needed to learn this. All of this from the ground up. I recall googling “How to budget” and was logging into accounts for the very first time. I started with the basics. I began to track my spending, which I had never done before. Another thing I did that was very scary, was refinancing the home. I was going from two incomes to one income. I needed to lower as many of my monthly bills and exprenses as I could.
This was the first time I began to pay attention and was intentional with my spending and money decisions. I had began reading books, listening to podcasts and audiobooks. I come to a realization, that if you are intentional people can “retire” in ten years! This was just insane!
A Path Thus Far
Let’s run through a quick time line and some significant milestones along the way.
2015 – Got Divorced. This was an uncontested divorced. This is where both spouses want the divorce. Together they are amicably willing to reach an agreement for all issues on their own. We didn’t pursue legal representation. This is also when I first started to pay attention to my finances, and learned the basics of personal finance.
2016 – I read a lot. Well, who are we kidding. I don’t really read books to often. Mostly, I listened to audiobooks and podcasts. I did read blogs. This is where I found my tribe. I found so much content and people that were into personal finance. I found Mr. Money Mustache, Get Rich Slowly, Afford Anything, Stacking Benjamins, and So many more. One of the first people you find when you google this stuff is none other than Dave Ramsey. I cut my teeth on these principles in the beginning. I focused on debt reduction and paid off my new truck and my home mortgage.
2017 – An amazing thing does happen once you don’t have debt payments. You have more money to invest. Since I had no debt, I began to invest up to 70% of my income, and continued to do this for multiple years. This was also the time I purchased my first rental property. During my financial education the topic of real estate seems to always come up. Another thing I did was find books and podcast focused on real estate. This is something I really believe. Real estate can help accelerate my path to financial independence. I do understand that I’m coming from a place of privilege here. I was fortunate to have a higher salary. During this entire journey I was making from around $80k in the beginning to around $130k when I reached FI. While many say this is challenging on a lower income, I do believe it can be achievable. Many people do! Keep in mind I began my journey at thirty-nine years old! If you start earlier there is plenty of runway for your contributions to grow and compound. This is when I also started blogging my journey. Talking about my divorce, learning how to budget, track expenses and all of the little things along the way.
2020 – Stayed the course. Over this time I continued to invest in the market, as well as purchase more real estate. Reaching what is called Coast FI, or Coast Financial Independence. This is the principle where you have accumulated enough investments that you no longer need to make additional contributions to achieve your Financial Independence (FI) number by your desired retirement age. Essentially, your current savings and investments will grow over time, through compound interest and returns, to reach your FI target without further contributions.
2021 – This is when I attended a 10-Year Planning Workshop hosted by Paula Pant from Afford Anything. We focused on where we wanted to be in ten years. This was when I really began to think about what my life would be like if and when I left W2 work.
2023 – After attending events like CampFI, The EconoMe Conference and FinCon and being inspired by so many people in the community. I really started to think about leaving my job, or retiring from my day job. I was seeing so many people that appeared to be living their best lives. Doing things they care deeply about. Focusing on things that matter.
2024 – After some soul searching, as well as having many great conversations with people in the community. I made the decision to leave work and focus on other things. I had reached financial independence and my rental income could pay for my living expenses. My investment portfolio would continue to grow until I need to draw on this once I reach retirement age.
Some Financial Things to Think About
Children: First thing. The children. If you have children, please do your best to communicate with your spouse, and any others involved that you’d like to do whatever is best for the children. We want to do whatever we can to cause as little disruption as possible. This cannot only be in terms of custody, but also from a financial aspect. This may include not only expenses related to food, shelter and clothing for your kids. But also healthcare and school expenses, as well as child support if determined.
Legal Costs: Attempt to discuss how the divorce filing will proceed. Ask your spouse if this can be done together without legal representation. There are many, flat fee and low-cost options. You can also self-file. In many cases this can be done online easily, with a simple court filing fee. If either of you aren’t willing to work together and legal representation is needed, it can lead to tens of thousands of dollars. When we add up all the legal costs this can cause even more financial uncertainty in an already stressful situation.
Review Income: This is a good time to review and determine what your income is. Everything. Pretax, and after. We’ll need to know what we are working with. Remember we’ll now go from two incomes down to one. What if you are going to be paying for temporary living arrangements, like renting an apartment or purchasing a used car if you had been sharing a vehicle? Whether or not you are going to pay any initial legal costs? This may be several thousand dollars in just the initial retainer. We need to ensure you can pay the rent or mortgage as well as any necessary bills are covered if you or your spouse were to move out of the home.
Review Expenses: Now is a the time to really track where money is going, and I’d suggest to slash every unnecessary expense. I mean it. Review the past three or four months of expenses. Review everything. Obviously we’ll have our rent or mortgage, utilities, and possibly a vehicle payment. But, we want to try a get rid of any of those unnecessary expenses. This can include eating out, some groceries, or the daily $4 latte. Don’t forget those reoccurring expenses we often forget about. Netflix, Hulu, Gym memberships and other subscription services like Amazon, Music memberships, Cable or Satellite services. It’s good to start trimming these expenses. We can always come back to some of these once things gain a sense of stability.
Living Arrangements: This is going to be awkward. But hear me out. If you or your spouse aren’t going to immediately move out of the home in the beginning, discuss if you can share the house in this critical time. It can be a lot less expensive to both live in the home. It’s not uncommon for one to take a guest bedroom, or one “move in” to the basement. This is what I had done in my own situation. You and your spouse can both live in the home while permanent living arrangements are being worked out. This may include the sale of the home, and the division of the equity.
Review Insurance: It can be a good idea to contact your current insurance agent or broker, and discuss the situation. Understandably, there is a lot of uncertainty. We can talk with the agent about the policies, coverages and premiums will work best for you, and your spouse.
Review Retirement and Investment Accounts: This is a big one. It’s time to review any retirement or investment accounts you have. Have a clear picture of what accounts are in both, you and your spouses names, as well as individual accounts. Also, review any beneficiaries for these accounts. There are times that the beneficiary may still remain as the former spouse. If they are the caretaker of the children, and if something were to happen to you, it may be something that continues to make sense. All of these accounts will be considered when assets are separated with your spouse. This is an uncertain time. We are navigating your path through divorce. We are trying to get our income and expenses under control. I suggest looking at pausing your retirement and 401k contributions temporarily. I know this may be controversial. But this can provide more take home pay to live on, and can also lesson the amount that gets placed into the retirement accounts that will be divided later.
Negotiate: Most divorces aim to separate the assets fairly, both physical and financial. We must also understand that FAIR isn’t always EQUAL. Almost everything is negotiable. This is physical assets such as personal property, furniture, furnishings, electronics, Blu-Ray players, and TVs. Including gaming consoles. I lost my XBox! This also includes retirement accounts, savings and checking accounts, investment accounts such as stocks and other investments like real estate or gold. Let’s not forget the equity in the home, and any other property like a cabin or vacation home.
Do Not Panic: You may be hearing all types of advice from all kinds of people. Some advice may be sound from others who have gone through similar situations. Other advice may be vindictive and hurtful. This is not only for your spouse, but also for you later on. Please don’t panic. Try to not make any financial decisions as a knee-jerk reaction only based on the way you feel emotionally, or by listening to others that may not have your best interest at heart. Try and keep in mine that others may not be looking out for you, your kids, or the well being of your spouse. It may be coming from a place of revenge to your spouse or out of spite.
I know divorce isn’t always a fun topic to talk about. I hope this gave you a little insight in some things to think about if you or someone you know is going through or thinking about going through divorce. Stay strong, keep those horns up friends! \m/ \m/
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