Figuring Out Finances After a Divorce

The L.A. Times tells the story of a 40-year-old woman named Adina Jones who put her career on hiatus in 2006 to be a stay-at-home mom, and who is now figuring out how to re-enter the workforce after divorcing her husband. She is currently working at Starbucks for $10 an hour part-time while earning a teaching credential.

Student loans form the bulk of Jones’ roughly $95,000 debt, which also includes $6,000 in credit card bills, amassed primarily during the year she and her husband were separated before their October 2013 divorce.

On the plus side, Jones is keeping expenses down by moving into her mother’s Orange County home with her three girls, ages 12, 10 and 6.

Field [a financial planner] said Jones has to reduce her monthly expenditures an additional 25% to 30% “until she can get a better-paying job.” One reason for the strict budget approach is that Jones needs to pay down a car loan more quickly than the contract requires in order to reduce the size of a $9,000 balloon payment she faces.

Jones has begun to build her negligible savings, with an eye toward establishing an emergency fund to cover three months’ worth of expenses. And she has been able to make small contributions to Starbucks’ matching 401(k) retirement plan.

Jones receives some alimony and child support, but wants to rebuild her career and savings.

Sandra Field, the fee-only financial planner in the story, says Jones should focus on getting her teaching credential so she can also get a better paying job, rather than what she’s doing now in the short-term (Jones was excited about the possibility of being put on the management track at Starbucks by becoming a shift supervisor). Field also pointed out that Jones is “entitled under California law to half of the retirement assets that her ex-husband accumulated during their marriage,” which Jones was unaware of because she didn’t have legal representation during the divorce.

The takeaway: If you are in a relationship and aren’t earning an income, have a plan in case your partner loses her/his job, becomes ill and unable to work, or in case the relationship simply does not work out. Also, have legal representation during divorce proceedings.

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9 Comments / Post A Comment

ThatJenn (#916)

All I can say is that it is astonishing how much you learn about marriage laws when you get divorced. Marriage: a binding legal contract where all the clauses are hidden in weird spots in all KINDS of different laws and you don’t get a chance to read them before you sign and also they all change as soon as you cross state lines. Yay let’s all get married! :(

Meaghano (#529)

@ThatJenn I was talking to a friend the other day who’s in a longterm relationship, and her boyfriend, on the topic of marriage, was like, “I don’t know, isn’t it really hard to get divorced in New York?” This stuck with me (hah!) and I found myself googling it on my phone Sunday morning. I can’t believe it never occurred to me to look into until now — even just the legal aspects of getting MARRIED state by state. It is wild and fascinating to see all these random things encoded into law. Like one grounds for divorce is withholding sex for a year? WTF. Anyway yes we should all talk more about the legal binding contract side of things!

@ThatJenn @Meaghano It’s sort of stunning to realize that no-fault divorce – the idea that a divorce can be granted by a court just because things aren’t working out – is still a relatively new concept, and some states (New York among them, I believe) don’t have it. I always find it funny to think that one spouse could sue for divorce and the other could successfully defend against the lawsuit and force the marriage to continue. Of course, it’s not funny, it’s awful.

jquick (#3,730)

Wonder what kind of car she has. Obviously one that she can’t afford.

garli (#4,150)

@jquick Her total loan burden has me scratching my head. If she’s 40 she went to UCSB 20ish years ago. When I was there (5-10 years ago?) it was under 10k a year. So I’m gonna assume it was cheaper then. If you took out loans for every penny of tuition AND food and board I guess you would rack up close to that? It just seems like a lot for a public university. (My friend who had to pay out of state tuition to the tune of ~25k a year racked up a similar debt, but her tuition was 1.5 times as much.)

I wonder how much the school she’s getting a master’s from costs.

pixiesuperhero (#3,951)

@garli A lot of people I know have a higher balance on their student loans than what they originally took out, because of interest.

garli (#4,150)

@pixiesuperhero Huh, I’m definitely paying more than I took out (aren’t we all) but at no point did my balance go above the original dollar value. I can’t even begin to fathom how frustrating that must be.

Sloane (#675)

The $1,900 per month is non-taxable child support. Not a huge amount, but very valuable, especially considering that her housing costs are pretty low. And she really should have gotten a lawyers – California is a community property state, and determining whether property is community property (divided 50/50) is an important part of the settlement.

Nothing could be worse than divorce. Family is the most precious value and people have to do their best to save families and bring up children in love, harmony and wealth. Unfortunately divorces often occur and thus I faced strong financial difficulties. http://northandloans.ca/ helped me to survive.

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