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Divorce and a Money Management Reality Check

Divorce is a lot like death, some people say. The emotional impact of uncoupling is similar, but the financial impact differs. If getting a handle on expenses is the most important issue to address, understanding the management of them is quite another.

Sadly, many emotionally distraught women with children tend to overspend before or during their divorce proceedings. Trying to meet an internal need with something external tricks your mind into thinking you’ll feel better. But you won’t. People think money solves everything. But, sadly, it doesn’t. And therein lies the indisputable struggle with the acceptance of the new reality.

Financial infidelity

“The difference between a divorce and a legal separation is that a legal separation gives a husband time to hide his money,” said former Tonight Show host Johnny Carson. It was funny then, but not so funny now if it’s happening to you.

It is unfortunate that many ex-wives were unaware of certain assets, bills, financial obligations or investments even existing. Or that their ex-husbands squandered and hid money from them for a variety of self-serving reasons. But husbands cannot take all of the blame, as’s Thomas Chiles reported: “Women are more likely to hide money because they plan on leaving their partner in the near future.” Chiles said whoever takes care of the bills can move a small chunk per month to a different bank account without it ever being noticed.

Laurie Itkin, a Certified Divorce Financial Analyst, (not affiliated with Hefren-Tillotson) at, wrote, “Women who stay in the dark financially during their marriage will find life after divorce more difficult than it has to be.” She lists six nasty surprises divorcing and divorced women often encounter during their divorce proceedings:

  • Being unaware of the total size of their marital debt including the primary mortgage
  • Home equity line of credit
  • Auto financing
  • Credit card debt
  • 401(k) loans 
  • Student loans

Keep tabs on attorney fees

Your attorney will probably require a deposit, and will charge you an hourly rate typically figured in 15-minute increments, plus every phone call with you or anyone else connected to your case and every written communication regarding your case. So make sure he or she sends you a monthly, itemized accounting of everything you are billed for. You want dates and names of phone calls and written correspondence.

And remember: When working with an experienced divorce attorney, it is equally important to be working with your Hefren-Tillotson financial advisor on your financials well before any settlement is reached.

Finality. Getting it right the first time. And moving on

Technically, there should be no “winners” or “losers.” Once a settlement is reached it is often in the form of a lump sum, rather than future periodic payments. While one advantage of a settlement is that neither spouse will appeal it, both agree to it and are presumably happy with it.

“It is essential to have the agreement memorialized in such a way that it makes the settlement legally binding and enforceable,” according to “Both parties can therefore be assured of finality and an end to litigation.”

But certainly, emotions run high, especially regarding the attachment to the family home. Certified Divorce Financial Analysts generally consider keeping the home as one of the biggest financial mistakes women make because of the cost of maintaining it. So because it is a joint asset, many women would be better off selling it while still married. The alternative is selling the home later and paying off the ex.

Couples know that if they could settle instead of battling it out in a courtroom they would be much better off. Regrettably, ex-wives have willingly accepted settlements that didn’t adequately support themselves or their kids. They forfeited some item of value simply to remain in the home. Without the type of career that would make up the financial difference with their own earnings, some women found better, more demanding jobs; but others did not, and were forced to sell.

Help has arrived

The new Tax Cuts and Jobs Act reverses a long-standing arrangement. “For more than 70 years, the tax law allowed the higher-earning spouse to deduct the alimony paid to their exes, while the receiving spouse was taxed at their income bracket,” writes Aimee Picchi in

Divorce agreements signed after Dec. 31, 2018 will affect higher-income spouses by losing the alimony deduction and paying federal taxes on it, while the receiving spouse won’t have to pay taxes. “This probably affects prenuptial agreements as well because most prenups likely include alimony provisions based on the prior tax law,” said Picchi. Talk with your Hefren-Tillotson advisor and your tax professional for more information on how this new tax law will benefit you.

Hefren-Tillotson employs a Certified Divorce Financial Analyst®, Rob Rodgers, CFP®, CDFA®, Vice President. As a CDFA, Rob specializs in examining the financial impact of proposed divorce settlements, while he helps his clients navigate the many financial issues related to a divorce.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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