Divorce after 50 – Surviving Financially

I welcomed Greg and Sarah into my office, and we had an informal discussion about the future. As soon as we got started, Sarah pulled out a copy of my surviving divorce guide, flipped to the post-divorce budget page, and handed me her completed post-divorce budget. I reassured Sarah that she had done the appropriate first step. Having a post-divorce budget is the foundation of surviving a divorce on a comfortable lifestyle budget.

Then Greg jumped in and tried to take control of the conversation by explaining Sarah’s budget. Greg was a 73-year-old semi-retired chartered accountant who spent most of his life working at Canada Revenue Agency. I quickly learned that he was working two jobs during his retirement: one was at the local community college teaching accounting, and the other was bookkeeping at the local Canadian Legion. Sarah, fifty years old, was still working as a schoolteacher and was the primary breadwinner in the family. They had one child (a ten-year-old boy) and adult children from a previous relationship. I’ll discuss more about Greg and Sarah later.

The kid in the story is my son, MacKenzie, who was about seventeen years old at the time. MacKenzie had wanted to attend university to become a Chartered Public Accountant (CPA). I remember thinking to myself that this kid was not accountant material; he didn’t fit the stereotypical accountant profile. Heck, he had failed Grade 10 math and had to attend summer school to earn his credit. I remember wondering how I could support my child in his aspirations without blowing a ton of family resources on university tuition, books, and accommodations, only for him to discover that he did not want to be an accountant after all.

One day MacKenzie asked, “Hey Dad, do you know any accountants I can interview? I want to know what it’s like to be an accountant.” I replied, “I know quite a few accountants.” I thought this was my opening; talking to accountants was a brilliant idea. From the interviews, he would learn that accounting is not for him, and perhaps he would look at other career ideas. Oh boy, was I wrong.

I asked him if he’d prepared a list of questions to ask. Sure enough, he had. So I made a few calls and set up appointments with two of the accountants I know. Our first stop was with Jennifer. I knew Jennifer on a personal level. Our kids went to the same French Immersion program, and our daughters attended the same figure skating club. Jennifer reached out to me a few times for divorce advice while she worked through her separation. She called me one day to ask if she could afford to buy a home. I told her surviving divorce on a comfortable lifestyle budget begins with creating a post-divorce budget. You can’t manage what you don’t know. Once that’s completed, things like buying a house make sense and fall into place. I shared my post-divorce budget workbook with her. I figured this would be a simple enough task for an accountant like Jennifer.

When I set up the appointment with Jennifer, she was gracious enough to open her home to MacKenzie and me. She lived in a nicely appointed semi-detached home in a desirable part of town. It was a substantial downsizing from her sprawling country estate, which her ex-husband retained in the separation. So MacKenzie began to work through his list of questions, and Jennifer took her time to provide thoughtful and informative answers. Jennifer, with her warm and funny personality, used colourful language to emphasize her point. MacKenzie sat on the edge of his seat in anticipation, taking notes and hanging on every word she said. When he finally asked his last question, Jennifer’s response left him dumbfounded. MacKenzie had asked, “When I become an accountant, will I manage money better? You know, my personal money.” Jennifer fell off her chair in gregarious laughter, tears rolling down her eyes. After taking a few moments to compose herself, she finally answered, “Hell NO!”

Jennifer explained, “The first thing you need to understand about money is that it’s emotional. Your father told me to create a post-divorce budget, and if I had done that, I would be on easy street. Everything would be comfortable, with no financial stress; however, I took the attitude, ‘Hey, I am an accountant. I’ve got this.’ After all, I manage the funds and operations of a successful multinational company. They pay me nicely for the work I do, but things are different when it comes to my own money. I should’ve listened to your father and prepared that post-divorce budget. Frankly, my personal finances are a basket case. I’m in constant conflict with my money. Ever since my separation from Bill, I’ve been on retail therapy. Between what I spent on divorce lawyers and my retail therapy, I am caring a $200,000 mortgage when I could’ve been debt-free. My line of credit goes in one direction: up.

Jennifer added, “The best advice I can give is to make friends with your money, establish a budget, work within that budget, track your expenses, update the budget, then repeat. You don’t need to be an accountant to do this. I used to do this before Bill and I got together. I was in a great place financially back then, and then life got busy, and I lost track.

Let’s return to Greg and Sarah, the Canada Revenue Agency auditor and the schoolteacher. Their primary goal in the separation was financial survival, so when I prepared their financial statement, I could not believe what the analysis revealed. I realized that if they sold their home, their investment properties, and had a garage sale, they would be $50,000 in the red. I turned to Greg and said, “Help me out. Am I missing something? How is it at 73 years old, you’re $50,000 in the red? You have no other savings or emergency funds, just debt.” Greg laughed at me and said, “Son, for a money guy, you don’t understand money, do you?” I replied, “Okay, educate me.” Greg said, “Humans are not machines or computer algorithms. Humans are emotional beings; when not in check, our emotions drive our spending habits. Money is emotional. We have made many emotional financial decisions.”

It’s said that divorce isn’t won or lost by who gets what; the real winner is the one who lives well and comfortably after the divorce.

By setting a budget, it will become much more clear how a two-person income is different from a one-person income. Creating a budget will reveal where money is wasted – making you more in control financially – and will alert you to how that money can be better used each month.

Since the household income is now reduced, setting a budget will help you to make new financial goals for the future. This may involve buying a new home or car, or saving for the unexpected. Setting priorities through a budget makes them much more achievable.

Once you have established your new budget, sticking to it will let you get rid of those old habits that might lead to financial problems. It is vital to get rid of those spending habits that existed alongside that second income. Instead, the budget will motivate you to stay in control of your finances.

We all know that divorce and stress go hand-in-hand. By setting firm, but realistic, financial goals and planning for the future, you will be able to alleviate a great deal of stress.

a.k.a. Impulse Spending. Relying on retail therapy can be dangerous to a budget, especially one cut in half. It is crucial to ensure you have a set budget that curbs this temptation. That doesn’t mean you have to cut it out altogether; instead, allocate a certain amount each month (determined by you), and stay within that amount.

A divorce can cripple a savings account, so making a budget will help you to see how much money you can afford to put away each month, and push you to do so. Savings are important, so re-building them by setting a budget should be a priority.

Not to sound redundant, but going from a double to single income means that cushion is often non-existent. It is essential to ensure money has been put aside for emergencies, whatever form they may take. That way, if the car breaks down, the house needs repairs, or your kid requires school materials, you have the means to cover whatever is required.