After a divorce, it can be challenging to think about your financial future. In the abstract, it can feel like you are facing a hill that you will never be able to climb. With half of your assets given to your ex-spouse, the recovery process may seem like an impossibility, but with time, patience, and a financially-mindful attitude, it can be done.
Your previous and current financial situation, as well as your current spending habits, all will play a factor in the time that it takes to recoup the finances lost in the divorce. Those facing economic hardships even before a divorce may now be facing the prospect of paying alimony and child support and may currently be struggling to afford basic living expenses.
It is difficult to understand what someone may be going through in those circumstances, and it would be irresponsible to tell someone who has trouble affording basic living expenses that they need to save money.
For those in slightly better financial standing, they may be able to figure out a way to recover their finances, but it may require a different line of thinking.
According to Leona Tam, of the University of Wollongong, Australia, and Utpal Dholakia, of Rice University, many people, especially Americans, see time as linear: from past, to present, to future. Researchers believe that this line of thinking attracts a sense of unwarranted optimism that affects their spending behaviors.
This optimistic outlook detracts from prudent behaviors, which is why researchers want to encourage people to start thinking of time as cyclical.
In order to do so, they did a study and examined a group of employed subjects with the average age of 58 years old. They were told to read a passage that basically stated that life consisted of many small and large cycles with events that can repeat themselves, just like the four seasons of every year. The idea behind it was that if you act or don’t act a specific way now, you are likely to act or not act similarly in the next cycle.
The subjects of the study were asked about how much they would put aside for retirement and savings in the next month and in the next year, and those that found themselves thinking of life in cycles indicated that they would save more, compared to those thinking of life as linear.
The researchers tried the experiment again, but with an emphasis of saving for the future. The results of this round of experimentation showed that those thinking of saving as a cyclical thing reported actual savings that were 82 percent higher than those thinking in a linear way.
Because of how the results can attribute linear financial thinking to a default position taken by most Americans, it stands to reason that a change in the way we, as individuals, see the course of a year will give us a better sense of when more saving is more feasible than other times of the year.
Applicable to life after divorce
The same logic applies for life after a divorce. Knowing how much you may have to pay for your living expenses, plus alimony and child support, during a given year will allow you to flex how much or how little you are able to put into savings or retirement.
After a few years, modification can help relieve some of the financial stress you may be forced to face and allow you to save more money, helping you recover a bit quicker. It also will help you with your retirement account, so you can enjoy your later years without worrying about whether or not you have enough money to stop working.
Many judges look to allocate latitude in figuring out alimony amounts and the duration of payments, and states have a list of guidelines that go into the decision that can affect modification, including length of the marriage, role in the marriage, standard of living, education and how each spouse has benefited from it, and each spouse’s income potential.
These changes to what you are responsible for paying for will affect the way you see the financial cycles of the year and how feasible or not feasible saving can be. In trying to recoup some of your losses and monitor your spending habits more closely, you can better prepare yourself for what is to come and protect yourself in cases of emergency in your future.