Its no secret that money is one of the biggest stressors and topic of frequent arguments. In the present economy, most people are concerned about, if not completely frightened over, their financial situation. Concern leads to fighting and, in unions which were already rocky, the present economic woes are enough to bring things to an end. But, with layoffs happening or looming, houses not selling and their values decreasing more and more each month, many people are becoming stuck between wanting to end their marriages and not being financially able to do so. More and more couples find themselves in this situation. And the frequently asked question is: what do you do when you can't afford to divorce?
The first step is to figure out where you are financially. I advise clients to write out their monthly financial expenses and figure out their present monthly need. Once you have that information, you are in a much better place to make decisions. The next step is to separate the fixed expenses such as monthly mortgage and taxes from the discretionary ones such as cable and cleaning service and figure out which can be reduced and which can be eliminated altogether. This gets you to the actual bottom line amount needed on a monthly basis.
For many people these days, it would be difficult or impossible to pay the monthly household expenses on one income, even with reducing or eliminating those expenses. If one person moves out, he or she now has to pay rent and utilities elsewhere, meaning that there is not enough money to go around. If this is the case, then asking or forcing your spouse to move out of the house immediately simply will not work.
In a previous post, I offered some suggestions for those who need to continue living together during and after divorce. In this post, I'll address more of the practicalities such as bill paying and separating finances. While it is easier to maintain a joint account, deposit all funds into that account and pay bills jointly, this situation may not work for some. It leads to disagreements about the discretionary spending of each party. Once a couple has separated, neither party wants their earnings to pay for the other parties meals out, shopping or other forms of entertainment. If a couple is going to be living together for an indefinite period of time, such as, until the house sells, a preferred course of action may be to split accounts rather than maintain completely joint funds. Both parties can pay the joint living expenses such as the mortgage and utilities and agreed upon children's expenses and can do so from a joint account. But personal charges and spending should be kept separate and paid from separate funds.
Another suggested course of action is to separate credit cards. Hopefully, each party has at least one credit card in their own name or enough credit history to open one. Removing each other as a signer from the credit cards in the name of the other may also be recommended. A joint credit card can be used to pay agreed joint expenses and separate cards can be used for each party's personal expenses.
Equity lines, if you still have one these days, should only be used by agreement and for joint expenses. Keep in mind that, if you file for divorce later on, or have already filed, you will have to account to your spouse, and vice versa, for any funds removed from an equity line. Withdrawing funds from an equity line without telling your spouse and/or using them to pay your separate debt and expenses will cost both of you in the long run. This will only create confusion, anger and more attorneys fees spent in determining how the funds were spent.
If you have a car with a high monthly payment, look into selling or trading it in, if possible. This may not be an option if you owe more than your car is worth. But if there is some equity, even a minimal amount, you may be able to lower this payment and reduce your monthly expenses.
If you own a house that neither of you can or want to maintain, consider your options carefully. Find out the present value of your home and the likelihood of it being sold. Ask a realtor for a list of recent sales of comparable homes and the selling prices. If you owe more than your home is worth, talk to a bank representative or other professional about your options.
Keep in mind that the above are only suggestions and not legal advice. Every situation is different and what works for one couple may not work for another. Before taking any steps to separate finances or reach an agreement with your spouse about how to pay bills and how much should be paid by either party, it is extremely important to seek the advice of a financial or legal professional.
