When you hear that you must “protect your assets” in divorce, you may not know where to start (if you even know what your assets are) or how to prioritize the assets you’ve accumulated in your life, so far. But when you’re going through a divorce, it’s essential to educate yourself and stay informed about how your divorce is going to impact your financial future.
What is your greatest asset? Most people think it is their house. They’re wrong. Checking account? Wrong again. For the vast majority of women, the most valuable asset we have is our earning capability. This is the asset we have the most control over to produce the money we need to live a fulfilling and financially secure life.
However, earning high incomes can be more difficult for women in the workforce, as women are more likely to have periods when they are not available to work full-time, unlike their spouses. Sadly, career headwinds can become even more of a factor during a divorce. Additional responsibilities during divorce might include more time to care for children, other housework duties and dealing with a time-intensive divorce process, further compressing the time available to devote to her career.
The time you do spend allocated to your career should pay you as much as possible. Investing in oneself is the best investment anyone can make to increase this income, and education is a great way to do just that. Look into furthering your degree and certifications to help support your career progression. Be sure to look into formal and informal mentoring programs as well as on-the-job training, etc.
Understand What it Costs to Live
It’s crucial for women to understand their current financial situation and be able to determine what they need to walk away from their marriage with, in order to maintain financial security. Many women hurt themselves by not using their actual past spending data to create their budget. Instead, some will ballpark their costs which invariably means that they round down their spending. It is only too easy to overlook expenses when you do not have the actual numbers in front of you. Others may fail to recognize many additional costs they will incur after ending their marriage, or new expenses that will appear as their kids grow older.
It is especially important to keep this in mind when accounting for the pandemic. During the COVID lockdown, we could not do things that we usually spent money on, like getting our nails or hair done and even having our children attend summer camps and other activities. It is crucial to accurately record all of the costs from a more typical year and thoroughly understand your spending and what you will need to maintain your lifestyle as a single-income household.
Protecting Your Physical Assets
When going through a divorce, it is essential to look at your non-liquid assets and the insurance needed to protect them. Do you own a home? Are you renting? If so, you need to review your homeowners and renter’s insurance. Car and jewelry insurance are also other pieces to consider.
An emergency fund is one of the most powerful ways to protect your overall financial stability. There will inevitably be unexpected expenses, and you will want to avoid taking money out of your portfolio, especially if the markets are down, which could lock in your losses. Saving between 3-6 months of living expenses will prepare you to face any unforeseen financial events and keep you on track to meet your financial goals.
Diversified Portfolio & Long-Term Investing
Don’t put all your eggs in one basket! Investment diversification is key and will give you broader exposure and more stable investment returns. It is also smart to check in on your portfolio once a month rather than once a day. Those who frequently check their account values are more likely to become stressed when they see losses in their portfolio. When people get scared, they are more likely to pull out of the market and end up veering off the course of being a long-term investor. Building a diversified portfolio, and staying the course, is the best way to protect your assets in the long term.