When the dust is settled, who suffers more financially after a divorce: men or women? No blanket statements here, however, studies suggest that women tend to bear the highest burden of divorce, and therefore require more public and private support. A study titled ‘Gender Differences in the Consequences of Divorce: A Study of Multiple Outcomes’, published in the journal Demography in 2018, suggests that after divorce, women experience disproportionate declines in standard of living and household income levels. They are also likely to see a sharp increase in the risk of poverty and losing home ownership.
At the same time, and quite unfortunately in most societies, divorced women have a lower chance of getting a new partner – which means that shared finances and better financial security thanks to a new and stable relationship, is unlikely. In case the woman gets custody of children, then the path to economic recovery and financial stability becomes even more difficult. After all, raising kids requires a constant monetary outflow in the space of education to health insurance.
Getting a financial advisor, or dependable financial advice from a reliable source, is therefore crucial for women who are looking to get a divorce. If you’re searching for financial planning guidance that can help you secure financial stability soon after your divorce, we have a few answers. We spoke to Dipika Jaikishan, the co-founder and COO of Basis, an app that powers financial independence for women through bite-sized financial knowledge boosters, advisory tools and a vibrant women-only community, about financial planning tips that divorced women absolutely need. Here’s what she had to say.
Before the divorce: Take charge of your finances before filing
Jaikishan starts out by giving a glimpse of the realisations that dawn on many women after divorce. “Earlier this week, I was speaking with someone in her early 40’s with two teenage kids, and working with a leading IT multinational company, who is in the midst of a divorce,” she explains. “While all these years she had been earning well, there were the dark phases:
● When a large part of her savings were used by her husband for his business,
● When she had to fund the recovery of a family member’s illness, who was on her husband’s side of the family, and,
● When she finally realised that, financially, she was on her own.
"I swallowed hard when I heard how financially uncomfortable she was now, how hard this was for her especially because money had not been in her management zone before,” Jaikishan says.
It is therefore, according to Jaikishan, very important to take charge of the situation before you land in it. “Before one decides to separate, and realise what can often be a high cost of divorce, it is prudent to gain a comprehensive understanding of finances,” she suggests. “This will help educate you on what your finances may look like post-divorce.” Here are a few steps she recommends you to take:
1. Start by keeping a detailed record of all your current expenses, and try to anticipate any future ones. You can use a budgeting or financial app to make this process easier.
2. Then, look to gather all of what you might consider ‘financial documentation’, including
● credit card statements,
● bank statements,
● retirement and investment account statements,
● any ledgers for loans and income tax returns.
“Yes, that’s tonnes to look after at one go,” she adds, “but take things one day at a time, and check items off your list as and when you’re able to locate them.”
After the divorce: Make a financial checklist
“From what I’ve observed over the years, the women who have the most in-depth understanding of their own finances (and thus, the most confidence heading into divorce discussions) are the ones who walk away feeling the most positive once the divorce is finalized,” Jaikishan says. “They were empowered to make their own decisions about what was best for their future.”
So, it is important to be financially literate and in charge of your own finances whether you are married or not. Often, the security that a marriage offers lulls women into a sense of stability, and you may not concern yourself with the financial aspect of married life. The traditional notion that men in the family are in control of finances--and therefore, you aren’t, even if you are a working woman earning enough and contributing regularly to the household – also comes in the way of gaining financial independence for women.
However, whether you are employed, self-employed, or a homemaker, gaining financial knowledge and independence is crucial--a goal best chased after from a young age. This is also the reason why imparting financial knowledge to your daughters and younger female members of your family is imperative. You may or may not need a divorce in the future, but financial independence can empower you throughout your life and help you navigate through any number of crises.
For women who are indeed looking at divorce proceedings, and a stable financial life after divorce, Jaikishan recommends the following nine-point checklist:
1. Identify and work with a financial advisor who can help you assess your financial situation.
2. List down your sources of income, whether it’s your salary, interest from investments, rentals, bonus, and every penny that adds to your income every year.
3. Take a check on your expenses. In case you were jointly taking care of expenses as a couple, it might mean that a large part of your income will now be used for these expenses.
4. Is there an alimony or a one-time settlement? Factor that in. If it is a one-time settlement that you are entitled to, then you need to figure out where to invest it (as soon as possible) for best financial growth.
5. Lay down your new financial goals. Often, being in the middle of or right after the divorce is a real hard time, particularly because financial discussions weren’t a part of your everyday life. “I have often heard women say, “I’ve never talked about this before” because we do not have money chats,” Jaikishan says. “If you are in this situation, don’t get bogged down, hit the refresh button and reset your financial life.”
6. Check on your life and medical insurance nominations, and if there is a need to create a will or trust fund for your heirs. Your insurance needs will most probably rise up especially if the children will be your responsibility. You owe it to them, and yourself, to fix the gaps when it comes to your life insurance and health insurance.
7. If you have made investments, or taken life or health insurance, in which you have listed your husband as the nominee, change the details. These could also include your provident fund, PPF, bank account, demat account, mutual funds and life insurance.
8. If you have a joint account, the spouse can withdraw money since the balance is shared equally, irrespective of who deposits it. You should close such an account immediately. Similarly, foreclose fixed deposits, joint loans and other joint investments, which are shared equally between the partners.
9. Most importantly, secure your retirement. Whether you have enough active working years left or not, a retirement fund takes time to build. If a retirement fund wasn’t on your checklist, it sure should be now.