Dealing with Divorce, Part 2: What Most Women Overlook

In this second, common mistake, Laura Kuntz CPA/PFS, MBT, looks at one way women approach the divorce process and their after-divorce lifestyle and what they usually miss. She details the specific steps to go through so that you don’t fall into this error.


The second mistake that I have often seen women make in divorce is underestimating what their spending will be once they're done with the divorce. When people start to look at their historical spending, whether they're going through divorce or planning for retirement, they often start by estimating the really easy things that they can estimate. Their mortgage payment, their utilities, maybe they look at a couple of credit card monthly statements and throw that in, maybe their phone, but what they often miss are what we call the irregular large expenses.

Things like what's the next car going to cost? What does home maintenance run? What have vacations run, or what might they run? Other types of travel? Home remodeling? What we call irregular large expenses. It is very, very important to go back and look over five years, or 10 years even if you can, and total up those irregular large expenses and do an annual average of what they might be. Take what the new car costs, take what vacations might cost, take what home maintenance might cost, and do some kind of an annual allocation.

Then, in addition, make sure that you go back and do what we call a historical spending analysis of at least a year. Even though life is changing from marriage to after marriage, go back and look at the actual spending for a reasonably representative year during the marriage. Look at all bits of spending, and that will bring forward things like cash withdrawals, or things that you didn't think about when you're picking out the big things.

This is so critically important because without this a person can estimate that they might need $6000 a month after divorce and maybe they really need $9000 a month, or maybe they need $9000 a month, and they really need $14,000 a month. Think about being after divorce and realizing that really to be comfortable you need another three, four, five, or six thousand dollars a month and you didn't plan for it.

Recently a client and I were joking. She's been a client for 20 years. I didn't help her during the divorce. What we were joking about is she had thought her after divorce budget would be $6000 a month, and it isn't. Luckily her investments have done well, so she's fine, but that is so important because that post-divorce period is going to last for a long time.

One of the true delights in helping clients who have come through divorce is walking with them and seeing how their lives unfold five years, 10 years, 15 years, 20 years out, and seeing their pleasure in controlling their own destinies, making their own decisions, calling their own shots, having their lives represent them. That is just the joy of this work and just a delight to see.