Here's the sad truth: Divorce doesn't just break your heart; it can leave you broke.
When married, women's median weekly earnings are about 20 percent higher than women who are divorced, separated, widowed or who have never been married, reports US News and World Report based on figures from the Bureau of Labor Statistics. Married women even have the edge on single men, earning almost 10 percent more than them, too.
But after divorce, a woman's financial profile plummets, falling by 41 percent, on average, nearly twice the income loss of divorced men, according to a report from the U.S. Government Accountability Office.
According to research by Stephen Jenkins, a professor at the London School of Economics, men, on the other hand, see their incomes rise more than 30 percent post-divorce.
The pay gap is partly to blame. In heterosexual marriages where both the man and woman are employed, the man out earns the woman 77.8 percent of the time, according to the Bureau of Labor Statistics.
But the divide is not entirely accounted for by the difference in earning power between men and women so much as it is the pay disparity for the unpaid labor of parenting.
The main reason women bear the brunt of divorce's financial devastation, according to Jenkins, is that during the marriage, they are more likely than men to leave their careers to raise kids. "The key differences are not between men and women, but between fathers and mothers," he tells The Guardian.
Having stepped off the corporate ladder for a number of years, these child-rearing women may not have advanced as far in their careers as their spouses who didn't take off, leaving them less developed workplace skills and holes on their resumes.
"The dynamic is changing a little as more women are staying in the workforce and continuing and accelerating their careers," Nicole Mayer, a certified divorce financial analyst, and partner at financial planning firm RPG Life Transition Specialists tells US News and World Report, "but typically, divorce hits women harder than men."
And that's not even counting the bill of the divorce itself. According to Divorce Magazine, the cost of divorce can range from as little as $8,500 to over $100,000 for lawyers and legal fees. But if the split is amicable and you can take the DIY divorce route, you might be looking at a tab closer to the cost of an airline flight — from $200 to $500.
Remember: if the divorce isn't done yet, the price tag for lawyering up need not fall only on you, a divorce lawyer in Boston tells The Atlantic: "If someone calls me and says, 'I need an attorney but I have no money,' I remind them they're not divorced yet, so they actually do have money. In those cases, I file a motion asking for retaining fees and the other person's lawyer will cut a check."
In fact, in all divorce matters, it's important to remember your legal rights. Here's a big one: if you didn't sign a prenuptial agreement, and you live in Arizona, California, Idaho, Louisiana, Nebraska, New Mexico, Texas, Washington, or Wisconsin, you're entitled to half of any assets acquired during the marriage. Those are joint assets to be divided equally. Even if your name isn't on the deed to the house, half of it is rightly yours.
You may have let your emotions get the better of you when you were falling in love, but don't let them cloud your judgment here at the end. The objective is to not let the pain of the breakup lead to further financial distress. Marie Claire found that women who wanted to "get it over with," experienced guilt over the end of the relationship, and those who trusted their exes to make good on promises once the divorce was finalized suffered financially.
"The silver lining [to divorce] is that most women feel much more confident, much more in control of their finances after the divorce than before," Natalie Colley, an analyst at financial planning firm Francis Financial tells US News and World Report. "That's because they're finally the ones in control of their finances."
"You always assumed there'd be two of you and maybe two 401(k)s and two IRAs, and that's now all changed," Mayer says. "So now it's really [about] updating your picture as a whole, your long-term picture."
And that can be a beautiful new image. It's time to start imagining your post-divorce dream.
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When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.