The saying goes that the face of poverty is a woman.
Make that a divorced or single mother with insufficient child support. On average women experience a dramatic drop in their standard of living after divorce while a man's standard of living improves significantly.
Why the disparity?
First of all, because there is no financial value assigned to the time we tend to our children, this value is not computed in divorce agreements. There is no accounting for the opportunity cost of lost salary and career growth for the hours spent taking care of a child.
Also, child support guidelines, which are determined state by state, are not intended to cover all costs associated with raising a child, and often fall far short. They take into account the cost of food, housing, clothing, and some healthcare expenses. But they do not cover a range of other expenses from after school activities like music lessons or sport lessons to vacations, or restaurant meals to school supplies. These expenses rise significantly as children get older.
The sad truth is that if a caregiver mother suffers financially, so does her child. And the human story behind this financial story is heart wrenching.
One of my clients described how her child went from a comfortable standard of living to below the poverty line virtually overnight. The child was afraid to tell her that he'd outgrown his sneakers. Another said her daughter declined invitations to go to the movies with her friends because she didn't want to have to ask for movie money. In both cases, the father was making over $200,000 per year!
So how can you make ends meet if child support payments are insufficient?
The first thing to do, whether you're contemplating divorce or are in the process of divorcing, is quantify how much your lifestyle truly costs such that you and your children can live in dignity.
As a divorce financial professional, I help clients and their attorneys put together projected budgets. It's important to account for as many details as possible: the cost of summer camp, haircuts, a computer the child will need for school in later years.
Then we weigh these financial needs against a couple's ability to pay. Does the family income cover this budget plus a reasonable amount for the noncustodial parent? If not, can a division of marital assets help supplement the difference? Can we scale back to a barebones budget? Can we distinguish between wants and needs?
In divorce, financial support comes from 3 sources:
1. Alimony or spousal support
2. Child support
3. Division of marital assets
Each of these sources has different tax and financial consequences. Yet because household spending on adults and children is intertwined, all three can contribute to a child's financial welfare.
I work with mediators, attorneys, and tax professionals to look at the financial and tax implications of proposed child support and spousal support payments along with the proposed division of marital assets. In addition, I use software to project the short and long-term impact of a proposed divorce settlement. These projections can be really powerful.
What if you're already divorced and find that you can't make ends meet with current child support payments? A financial planner specializing in divorce can work with you to put together a saving and spending plan and help give you a holistic picture of your finances. It can be really reassuring to work with a financial advisor who takes the time to hear your concerns in a supportive, calm environment and helps you gain control over a financial situation that can seem overwhelming.
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