Divorce stress meets recession mess, and women struggle

When Carol Meerschaert of Paoli, Pennsylvania divorced 10 years ago, she experienced first-hand how starting over as a single mom also means managing the money without any help. Her kids were 7, 10 and 14, and even though she had income as a dietician, “it certainly was very challenging,” Meerschaert recalls. She moved into a smaller home, paid her own mortgage and, in time, funded college tuition for her eldest daughter. “She had to drop out of school for a year — a school she loved,” Meerschaert says. “I went back to school, too, to get an MBA so I could make more money.” She never lost her house, or her nerve. But other woman aren’t so lucky. Experts say alarming numbers of women emerge from divorce lacking even the most basic money management skills, to the point where many begin single life as financially illiterate. Meanwhile, the serpentine economy of 2011 has only placed added strain on unhappy couples and divorced women. A new study by the University of Virginia’s National Marriage Project found that divorce rates have followed the fall and rise of the nation’s troubled economy during the last four years. Between 2008 and 2009, divorce rates dropped significantly as families experienced unemployment and mortgage stress. In 2008, the divorce rate fell 24 percent, and in 2009, 57 percent. The rate is on the rise, however, as the nation slowly recovers from the recession. “The current economic climate has certainly added more complications to the divorce process,” says Linda Lea Viken, president of the American Academy of Matrimonial Lawyers. Viken cites a new survey where 85 percent of the organization’s members reported a jump in divorce settlement difficulties since 2008 due to housing debt. That, in turn has impacted child custody cases due to relocation issues, 53 percent of members reported. What’s more, today’s divorced women experience ruder financial awakenings than in generations past, experts say. Massive credit card debt often emerges in the divorce proceedings — indicating that despite the Great Recession, many couples have lived far beyond their means. “Three of the top five causes for divorce are often financial: job loss, housing problems and credit card debt,” says Chris Bixby, a senior financial planner and vice president with Key Private Bank in Burlington, Vermont. He recalls a formerly well-off client whose ex-husband strapped her with a $23,000 debt on her credit cards from a failed business venture. She never saw it coming. Soon she was cleaning houses to make ends meet. “We started with the basics,” Bixby says. “The first step to getting out of debt is to avoid going deeper into debt.” By cutting back on the free spending she was used to in marriage, Bixby’s client slashed 80 percent of her debt in 18 months. Still, “the economic downturn has made divorce more complex than ever,” says Lee Block, a twice-divorced woman and mother of two, who now writes the Post-Divorce Chronicles and serves as a divorce coach. Block (pictured at right) says many of her clients now try to work things out — but not because of love. “I’m actually in the position of trying to help people get back together because they can’t afford to get divorced,” Block says. “It could be a question of ‘How are we going to live together amicably?’ Or it could be, ‘How do we stay together for the meantime and not kill each other?’ ” Block also describes a scenario that sounds positively 1960s: “I see women who don’t know how to pay a bill, and it shocks me. They’re in their 50s and 60s and don’t know how to write a check, or get their own credit cards, or start a bank account. They’ve been taken care of their whole lives by their husbands.” And yet, nine out of 10 women will be responsible for their finances at some point, due largely to divorce or the death of a spouse, says Jeffrey M. Verdon, a lawyer in Irvine, California who conducts “For Women Only” estate planning seminars. Like Block, Verdon points out that women in their 50s and 60s are especially at risk. But the financial services sector often overlooks these women.  “The industry has not done a very good job” reaching out, he says.  “If you look at their ads in magazines on TV, they’re generally associated with a couple. I don’t see any firms gearing their services to single women, and it’s a big mistake.” As a primary piece of advice, Verdon and others suggest that divorcing women talk to friends to see who manages their money. “I tell my clients to go find the wealthiest person in their community that they know, and ask who’s advising them,” he says. “Divorcing women have to be careful, in that when they’re looking for advice, they’re also open to fraudsters. So the best place to start is the family attorney, the family CPA, or a CPA and attorney who represent someone else in their family.” “Ideally, a person would bring their financial planner into the divorce process as soon as possible,” says Jennifer Immel, a senior wealth planner from PNC Wealth Management in Naples, Florida. Even financially savvy women can find divorce draining, so a good planner will restore fiscal sense amidst the stress. A clear-headed reckoning of household expenses, for example, can impact a settlement in the ex-wife’s favor. So while her marriage of almost 20 years ended on a sad note, Meerschaert now has that MBA , along with three grown kids who look destined to script a happy financial ending: “Hopefully they’ll grow up top be money-savvy people. They won’t go into credit card debt. I want my kids to see that if you work hard, and make the trade-offs, you can end up much happier.”