The “D” Word. Divorce. I’ll not spend too much time on the actual separation and divorce from my wife of fourteen years. Divorce happens. It can suck! While the divorce rate has been declining in recent years, it’s still quite high. 50%-60% of marriages end in divorce. The decline seems to be related to those waiting longer and getting married later in life.
I really didn’t think about my finances too much until my separation. I was following the, old school, legacy scenario. Go to school… get a job… work till you die. My wife and I were always pretty frugal. I purchased my first new car making 7.50/hour, and we got married in 1998 without a pot to piss in. We got by on a wicked-tight shoe string. But the wedding was killer. It was, and will be one of the happiest days of my life.
Early on, and into marriage I had debt, and didn’t think too much about paying minimums. We did, however, often pay off any credit card debt. I remember the very first thing I ever financed, ever in my life… my Crate GT 200 Combo Guitar Amp….ohhhh…. \m/ \m/
This all changed when we split. All of a sudden I realized I was going to be responsible for living on my own. I’ll have to pay bills all on my own. My mortgage, my car payment, utilities, I had no idea what child support was going to be. I was so totally terrified.
This was a shock to the system.
I immediately started to take action and some of the things I did were:
Review my expenses
I hadn’t really paid a lot of the bills. My wife had really done a majority of the family finances from a joint checking, joint savings, and joint credit card. This took a bit of a learning. I reviewed utilities, and other bills to see how much I needed to live on, and what I could eliminate. For starters, the first thing to go was DishNetwork. I had been unconsciously paying over $100 a month for TV/DVR in which I really didn’t have time to watch anyway. I eliminated my DishNetwork bill, and quickly realized there was other things that could go.
Review my Mortgage, and refinance
We had moved into our primary residence, a single family home, in 2002. One thing we had been doing is something called the equity accelerator program, offered by the lender. Some mortgage companies offer a similar program. This allowed us to pay our mortgage every two weeks vs. once a month. Be careful, there can be fees attached to this. However, for ten years we had been jamming on this. We were making great progress on paying off the mortgage. Sadly, I had started over. I had to refinance the home load to lower the monthly payment, and thus 30 years kicked off again from the beginning, More on this in future posts.
Created a Budget
I usually just used a “I probably have this much in my account” method of budgeting. Meaning, I really didn’t have one. I did usually clear any larger purchases with my wife, and talked it over with her on why I needed the newest iPhone, MacBook, Iron Maiden Box Set or Robotic Lawn Mower. But now, I was on my own. Time to get real. Since I had reviewed my expenses, and needed to budget I graduated from Apple Numbers spreadsheets and opened an account with Mint to track things. I was horrible at spreadsheets anyway.
I Opened New Accounts
Now that I was on my own, I opened individual Savings, Checking, and Credit Card accounts, and changed any automated deposits, expenses and deductions to use these accounts. It felt good to start on a clean slate.
In recent years I had maxed my 401k contribution from my employer. At this time I was up to 15%. I wasn’t sure how much living expenses were going to cost, and wanted to ensure I could pay my bills. So, for the time being, I stopped contributing to my 401k. As I also understood it, upon the separation of assets, the retirement accounts are usually combined and separated in half. This is how it starts, anyway. EVERYTHING in a divorce can be negotiated. Again, I’m not gonna get too deep into the specifics around the actual divorce or the splitting of any assets. This can all be variable based on what state you are in, if you have an attorney. And… of course, it also depends how amicable the split is. Luckily, My former wife and I had a pretty reasonable separation, and were as amicable as we could be.
My divorce caused me to be intentional on my budgeting, saving, investing, and spending. It forced me to stop living on autopilot, take a step back and really dig into what I needed, and what was essential. I learned what I didn’t need, or what I didn’t value. (More on this in future posts too!) It was a sad turn of events that caused me to have this realization, but If I look to find the best of a bad situation, it was the beginning of my path to Financial Independence.