The National Institutes of Health (NIH) states that the average woman can expect their standard of living to decline by up to 45% after a “grey divorce.” The National Bureau of Economic Research (NBER) also notes that families with children tend to experience income declines of up to 45% within the first six years of divorce. These statistics highlight the importance of an effective post-divorce financial plan after a collaborative settlement. Whether spouses share children or not, it makes sense to be realistic about the economic challenges associated with divorce. Various strategies could help mitigate these challenges, and spouses may choose to discuss their options with experienced family law attorneys in Dallas. Expand upon this discussion by contacting Zegen Law Firm, PLLC at (972) 653-0448. We serve families in Dallas, Collin, Rockwall, and Denton Counties.
Be Realistic About Your Future Standard of Living
The reality is that many spouses will encounter serious financial challenges after their divorces become final. Even if a spouse walks away with a substantial collaborative settlement, it may be necessary to reduce their standard of living in order to experience long-term economic stability. This may be difficult, especially for spouses who have become accustomed to various luxuries and privileges over the decades. Examples might include regular vacations, expensive vehicles, and relatively large houses. Spouses might also become used to a high level of discretionary spending during marriage.
Many shrewd spouses downsize after divorce. Regardless of their previous standard of living and subsequent loss thereof, this often makes sense on a purely logical level. After all, a single person does not need as much space as a couple. A smaller house, apartment, or townhouse could reduce costs and maintenance needs while still providing more than enough space for a single individual. Spouses may also consider more affordable vehicles and fewer vacations after divorce. Note that these steps may only be temporary until a spouse regains financial stability. If a spouse ignores financial realities and tries to maintain their previous standard of living with fewer economic resources, they may quickly experience serious pressures and eventual destitution.
Do Not Rely Too Heavily on Spousal and Child Support
Spouses often forget that spousal support and child support are usually temporary in Texas. Also known as “alimony,” spousal support in Texas is often short-term. Permanent alimony is quite rare, and courts may only award this type of support in cases involving disabilities or retirement-age spouses. Most spouses divorce after less than a decade of marriage, and spousal support generally lasts for half the length of the marriage in this type of situation. In addition, the Texas Family Code states that spousal support cannot exceed 20% of the monthly income of the paying spouse, or $5,000 per month (whichever is less). In other words, most alimony is temporary and relatively low. A post-divorce financial plan should not be overly reliant on spousal support for these reasons.
The same general logic applies to child support in Texas. While child support has the potential to be higher than spousal support in Texas, it is also inherently temporary. When the average child reaches the age of 18 or graduates from high school, they are no longer eligible to receive child support. The only exception is if the child has some kind of mental or physical disability. In other words, a parent will only receive child support for a certain number of years. In addition, it is worth noting that parents should only spend child support on child-related needs, such as housing, food, clothing, health care, and utilities. A parent who becomes overly reliant on child support to fund a high standard of living may experience a serious financial shock when this income suddenly stops.
Use Support to Regain Financial Independence
Instead of relying on child and spousal support to fund an unsustainable lifestyle, spouses may instead use this income to give themselves enough “breathing space” to achieve true financial independence. For example, a spouse might use the limited time and resources provided by their support to attend college and finish a degree. They may also obtain a new qualification or certification that allows them to re-enter the workforce. This strategy ensures long-term financial stability, and it may allow spouses to extract as much real value from their support as possible.
Sometimes, alimony in Texas is specifically “rehabilitative.” In other words, a family court judge will ask the recipient to formulate and submit a realistic post-divorce financial plan as a requirement for alimony. Spouses who receive this “rehabilitative alimony” must adhere to their pre-determined plans, which often involve retraining and re-certifying to re-enter the workforce. Failure to follow the plan may result in the loss of the remaining alimony. Spouses may be able to learn more about rehabilitative alimony by contacting Zegen Law Firm, PLLC.
Consider Investing in Collaborative Settlements for Passive Income
Spouses who walk away with substantial collaborative settlements might consider investing these “lump sums” to ensure passive income for the foreseeable future. While there is always a certain degree of risk associated with investment, certain strategies could generate regular income. For example, treasury bills may be attractive to spouses who walk away with seven-figure settlements. The same general logic applies to dividend-paying stocks.
Another strategy might be to invest in rental properties to generate rental income on a regular basis. These approaches could be especially suitable for retirement-age spouses after “grey divorces,” as these individuals may no longer be able to re-enter the workforce.
Learn More About Post Divorce Financial Planning With Zegen Law Firm, PLLC
While financial planning is important after a collaborative settlement, the most appropriate economic strategies depend on the unique circumstances of each family. For example, one spouse might receive alimony for an extended period of time, while the other spouse may not. One spouse might have a stable, high-paying job, while the other may need to re-enter the workforce. Some may be able to rely on inheritance or family members for support, while others may lack these safety nets. Whatever the case may be, it makes sense to develop a personalized financial plan based on the specific factors at play. A conversation with an experienced family law attorney in Dallas may provide opportunities to discuss these factors. Consider expanding on this topic by contacting Zegen Law Firm, PLLC at (972) 653-0448. We serve Texas families in cities such as Dallas, Allen, Plano, McKinney, and Wiley.