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Navigating the Financial Side of Divorce

Divorce is one of life’s most challenging transitions – emotionally and financially. After years of building a shared financial life, you’re suddenly faced with untangling everything, from your finances to your future plans. Questions like, “What happens to our house? How will I manage on my own? What’s fair when dividing everything we’ve built?” are essential to address.

The good news? With a clear understanding of your options and proactive planning, you can create a solid foundation for your post-divorce life.

Dividing Assets

One of the most complex aspects of divorce is dividing your assets. It’s not just about who gets what; it’s about ensuring that you have a clear picture of your financial situation and a fair plan for moving forward.

  • List all assets. Start by listing everything you and your spouse own. In most cases, marital property includes assets acquired during the marriage, regardless of whose name is on the title. Certain items – such as gifts, inheritances, or assets protected by a prenuptial or post-nuptial agreement – may not be considered marital property, however. Be thorough and don’t overlook assets such as frequent flyer miles, retirement accounts, or collectibles – they may factor into the financial picture.
  • Understand their value. Knowing what your assets are worth is important. You might need professional help, like appraisers for property or valuations for a business. For bank accounts and investments, statements from financial institutions can provide accurate numbers.
  • Decide how to divide. How assets are divided depends on your state’s laws. Community property states split everything 50/50, whereas equitable distribution states divide assets fairly, though not necessarily equally. A financial advisor and attorney can help you determine what’s realistic based on your situation.

Understanding Support Obligations

Divorce often brings financial obligations such as child support or spousal support (alimony). These need to be factored into your financial plan.

  • Child support. If you’re paying or receiving child support, know that it’s designed to cover essentials such as housing, education, and health care. Look at how this fits into your budget – whether as an expense or income – and plan accordingly.
  • Spousal support (alimony). Alimony helps ensure that one spouse doesn’t face undue financial hardship. This is especially important if one partner took time out of the workforce to support the family. The duration and amount vary depending on your state, so it’s smart to consult legal and financial experts to understand your options.

Legal and Mediation Costs: Plan for the Process

Divorce isn’t just emotionally taxing – it can be expensive. Budgeting for these costs early can help avoid financial surprises.

  • Traditional divorce. If your case is contested, you’ll likely need an attorney. Rates vary, so ask for a clear estimate upfront.
  • Mediation or collaborative divorce. If you and your spouse can work together, alternative methods may save you both money and stress. These approaches are typically less expensive and give you more control over the outcome.

Rebuilding Your Financial Life After Divorce

Once the paperwork is signed, it’s time to focus on your financial future. Taking these steps can help you regain control and confidence.

  • Create a new budget. Your income and expenses will change – new housing costs, insurance premiums, or child-related expenses might now be part of your monthly routine. Tools like budgeting apps or a simple spreadsheet can help you keep track.
  • Reassess your retirement goals. Divorce can affect retirement savings, especially if you’re dividing a 401(k) or IRA. A financial advisor can help you revise your plan to ensure that you’re still on track for the future you want.
  • Build an emergency fund. Life after divorce can be unpredictable. Aim to save at least three to six months of expenses. This cushion can help you handle surprises and start your new chapter with more peace of mind.

Special Considerations for Women

Although divorce affects everyone, women often face unique challenges that require special attention.

  • Earning potential and career goals. If you’ve been out of the workforce or earning less while supporting your family, this is an opportunity to focus on rebuilding your career. Consider whether you’ll need to upskill, reenter the job market, or negotiate spousal support to bridge the gap.
  • Retirement savings. Wage gaps and career breaks mean women often have less saved for retirement. If you’re awarded a portion of your spouse’s retirement accounts, ensure that the funds are transferred correctly, using a qualified domestic relations order (QDRO) to avoid penalties.
  • Health insurance. Explore new options if you were covered under your spouse’s employer-sponsored health plan. COBRA can provide temporary coverage, but marketplace plans or employer-sponsored options may be more affordable long term.
  • Custodial considerations. If you’re the custodial parent, plan for child-related expenses such as day care, extracurricular activities, and school fees. Be sure that these are accounted for in your divorce agreement to prevent future disputes.

Moving Forward

Divorce marks a major life transition – but it’s also an opportunity to start fresh. With the right support and financial planning, you can navigate the challenges, reduce uncertainty, and build a stable, fulfilling future.

Remember: You don’t have to do this alone. We’re here to help you every step of the way. Whether you’re just starting the process or finalizing the details, thoughtful financial planning can help you move forward with confidence.

This material has been provided for general informational purposes only and does not constitute tax, legal, or investment advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a qualified professional regarding your situation. Commonwealth Financial Network does not provide tax or legal advice.

© 2025 Commonwealth Financial Network®

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Understanding and Protecting Your Purchasing Power

Imagine walking into your local grocery store with a $20 bill. Last year, that might have bought you a gallon of milk, a dozen eggs, and a loaf of bread with change to spare. Today, those same items could cost noticeably different amounts and $20 may not cover as much. This everyday experience demonstrates the concept of purchasing power—how much your money can actually buy. Understanding this concept helps you make smarter financial decisions and grow the value of your funds over time. 

What Shapes Your Money’s Value?

Your purchasing power changes as the economy changes, influenced by various economic factors. Inflation and purchasing power are inversely related—when prices rise, the amount of goods and services you can purchase with the same amount of money decreases. And, conversely, when prices decrease, you can buy more.

Think about buying a car. The same $30,000 that bought a well-equipped sedan five years ago might only buy a basic model today. Or consider housing—monthly rent that was $1,500 a few years ago might now be $2,000 for the same apartment.

Understanding purchasing power isn’t just about watching prices go up and down, however. It’s about learning how economic changes affect both your spending and saving strategies. This helps you make smarter decisions to protect your money’s value in the years to come.

Making Your Savings Work for You

One way to counter inflation and preserve purchasing power is through smart savings choices. Traditional savings accounts offer accessibility, but interest rates can vary widely. High-yield savings accounts, for example, often provide significantly better returns than standard accounts, while government securities, such as Treasury bills or savings bonds, offer other secure savings options.

For instance:

  • If you had $10,000 in a regular savings account earning just 0.1% annually, after five years, you’d earn around $50 in interest.
  • By contrast, in a high-yield savings account earning 4% annually, you’d earn about $2,166 in total interest over the same period.

A financial advisor can help you explore savings options that best fit your goals, making it easier to protect your purchasing power over time.

Planning for a Comfortable Retirement

When planning for retirement, understanding purchasing power becomes especially important. A lifestyle that costs $50,000 per year today will likely cost a different amount in the future. Similarly, what you can buy with a $1 million retirement fund today will not equal what you can buy with the same amount 25 years from now.

Your spending patterns in retirement usually shift over time:

  • Early Retirement: Often marked by discretionary spending on travel and hobbies.
  • Mid-Retirement: A time when housing needs may shift, perhaps toward downsizing.
  • Late Retirement: Typically, expenses for health care and support services increase.

Over a retirement that might last decades, changes in purchasing power could mean that what seems like ample savings now might cover far less in the future. A financial advisor can help you create a retirement strategy that aims to keep pace with rising costs, especially for essentials like health care.

Career Development and Income Potential

Career growth is another way to help protect your purchasing power. For instance, if you start with a $50,000 annual salary, adding certifications or new skills could boost that to $75,000 or more—helping your income keep up with rising costs. Continuing education, professional certifications, and skill development allow you to stay competitive and command higher earnings. Side income from consulting or freelance work can also diversify and strengthen your income.

Building Long-Term Financial Security

Protecting your purchasing power isn’t about predicting economic trends; it’s about staying prepared and adaptable. Understanding financial tools and regularly updating your strategy can make a significant difference.

Taking Action

Start with these steps to better manage your purchasing power:

  • Track Key Prices: Choose your top 10 most-purchased items, track their prices for six months, and adjust your budget as needed.
  • Shop Around for Savings: Check savings account interest rates every January to see if higher-yield options could help grow your savings.
  • Invest in Your Skills: Identify certifications or training that could boost your earning power and set a timeline for earning them.
  • Adjust Your Budget Regularly: Review your monthly budget each quarter to reflect changes in prices and spending patterns.
  • Meet with a Financial Advisor: Review your long-term financial strategy on a regular basis to ensure that it keeps pace with changing economic conditions.

Taking small, consistent steps can build up to significant results over time. While you can’t control the economy, you can take control of your financial future by staying informed and proactive.

© 2025 Commonwealth Financial Network®

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