This guest post from Mandy Walker is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. Mandy writes the blog Since My Divorce, a collection of stories mostly from women about life after divorce — the challenges, the hardships, the accomplishments and the joys. She now realizes that her divorce was part of a much larger journey about learning to honor her feelings.
In January 2006, I sat in a board meeting for a non-profit health clinic and listened as one my fellow board members told us she was getting divorced after more than twenty years of marriage. “I've decided that if I have to support my husband for the rest of my life, I may as well be divorced and be happy,” she said.
For the next few weeks, her words reverberated in my head. I had been married for almost sixteen years. To the outside world, we could be the perfect couple:
- Beautiful home
- Nice neighborhood
- Two beautiful children
- Ski house
- Overseas vacations
- And so on
I'd taken a severance package from my corporate job in financial services a couple of years before and was taking some time off contemplating a second career as a journalist/writer. He was a teacher, but had been a stay-at-home dad for a few years while looking for something new.
From the inside however, it was struggle, a common story of two people who used to love each other who had grown apart. Until then, though, I couldn't bring myself to consider divorce. No one in my family had been divorced, and I had no divorced friends. I had no role model. But I kept hearing my friend. I wanted to be happy too. What was holding me back?
I had been the primary breadwinner during our entre marriage. My husband had worked most of the time, but didn't contribute to the household expenses. At some point many years ago, I got tired of reminding him to make his agreed payment, and so just let it go. Now it festered. If we divorced, that would mean giving half of all “our” assets to him. That could mean giving up on retiring early, giving up half the retirement nest egg, giving up the large house, giving up the no-budget lifestyle, and maybe even giving up on going to journalism school.
But still those words echoed — I just wanted to be happy.
Running the numbers
As the household bill-payer, I knew everything about our finances, so I put all our assets into a spreadsheet, estimated the current values, and what it would look split everything in half. I've used Quicken for many years, so I knew what our monthly expenses were, and from there I created a budget for myself — something I hadn't had for many years. I compared that to what would be my half of the assets. I started to think that maybe this wasn't so impossible after all.
No, I wouldn't be able to keep the house. But I didn't want the house — it was too big. My two children and I didn't need 5,500 square feet and an acre of yard. I didn't want the expense or responsibility of maintaining it. A smaller house in the same town would be better for us and would lower my mortgage expense. I didn't want the ski house either. Those ski weekends had come to be work rather than leisure.
No, I wouldn't be able to retire early, but if I was able to negotiate some additional funds in a settlement, I would be able to finish my Master's degree and build a second career. It would allow me to work part time until our children were through high school, which I felt was important to their well-being (and was something I really wanted to do, having worked full-time even when they were infants). Yes, it would probably mean working until at least normal retirement age, but that didn't even seem like a sacrifice.
The assets we had would certainly provide both of us with the wherewithal to cover expenses related to the children, but it would mean negotiating child-support payments each month. The thought of that produced a knot in the pit of my stomach. If I hadn't been able to get my husband to make his agreed household contribution during our marriage, how would I deal with delayed and haphazard child support? I knew it would be a legal arrangement and there would be legal recourse but I'd come to realize I wasn't good with conflict.
So again, I turned to Excel. I'm not sure what made me think of this, but I decided to project what the children's expenses would be through the end of high school and college. I asked our financial adviser what I should assume for college expenses ($40,000 per year) and an inflation factor. Then I took the net present value of that large amount (less the value of their 529 College savings plans) and that was what I proposed to set aside in a trust to cover the children's expenses.
Once I figured out how to protect the financial resources for the children, virtually all of the resistance and reluctance I'd felt to dividing the assets disappeared. Divorce indeed became a possibility.
According to my attorney, the trust was an unusual arrangement but there was provision for it under Colorado State law, and while there was inevitably some negotiating around the division of assets, my husband agreed with the concepts. So, how has it worked in practice?
How's the children's trust working?
I love the children's trust. So far, it's spared me what seems to be the typical child-support wrangling. My ex and I don't discuss normal day-to-day expenses, and for non-routine expenses we generally see eye-to-eye. That's pretty much the same approach to finances as during our marriage. I don't mind that; it makes my life easy.
In practical terms, the bulk of the money is in mutual funds within a brokerage account. Day-to-day expenses are drawn from a checking account funded with periodic withdrawals from the brokerage account. I keep four to five months of expenses in a cash account within the brokerage account. That leaves enough flexibility to deal with unpredictable expense spikes so common with children.
The bad news is that because of the financial crisis, the trust is not likely to last until both children are through college. However, thanks to some extra cushioning, the trust fund will probably cover each child until they graduate high school — my daughter in 2011, my son in 2014. Their 529s will then kick in for college. Almost certainly, there won't be enough. And while that's not what I'd planned, I've come to embrace the idea that my kids will benefit from having some student loans.
Where am I now?
My first reaction to being divorced — in school and freelancing — was to cut back on absolutely everything and to agonize over purchases that weren't clearly essential. Each month, I'd just draw from my brokerage account what I needed to cover what I had spent. You'd think that would be a great, care-free way of living, but I was paranoid my nest egg would run out before I had established my second career and an earnings stream. In many ways, I was being irrational.
What helped has been to establish a regular monthly income that comes from my brokerage account to my checking account. Again, I used my Quicken data to figure out a budget and the monthly amount. (Interestingly it's right around $75,000 a year.) This has created certainty, much like getting a regular paycheck, and makes me feel comfortable. I can take my savings balance, divide it by the monthly amount, and figure out roughly how much longer I can support myself. I can still draw additional amounts for unforeseen expenses or splurges, but I do so being able to project the consequences.
While an adjustment, being on a fixed income is actually refreshing. I'm more mindful of my purchases, but don't feel it's a hardship. There's so much I've been able to cut back on and not miss. The mail-order catalogs no longer fill the recycling bin, and my house is less cluttered. These days I use coupons at the grocery store, and I enjoy seeing how high I can get the percentage of savings. I'm more of a comparison shopper, too, and less impulsive. That makes me feel I'm actually a better decision maker now.
The financial crisis put a major dent in my savings, as well as the children's trust. That, the loss of my health insurance once I graduated, and the difficulty of getting well-paying freelance work, motivated me to find part-time work. I found a great twenty-hour a week position at the nearby university. My financial adviser calls it my “tranquilizer” job. And yes, the benefits give me peace-of-mind, and the additional income helps to stretch out my back to work deadline.
I work in the mornings so I'm able to be home in the afternoons when my kids are done with school and ready for various after-school activities.
Looking to the future
Thanks to an unexpected small inheritance, my savings should last me another three years, at which time my son will be a high school senior. However, with my daughter off to college next year and my son likely driving himself, I'm thinking of returning to full-time work by January 2011. This is very appealing: It would leave me with a healthy emergency fund, it would give me the earnings to start paying off my mortgage faster, and I would likely still be able to retire by sixty-five.
Clearly I won't be retiring early, but I have no regrets about that. What's more important to me is being able to be at home in the afternoon when my children come home from school. And I'm happy. At times I'm euphoric. I can be walking to work and find myself smiling for no particular reason. I love my life now — and I couldn't say that before.