Planning for the Kids
Money issues and raising kids before the breakup might have been difficult. The emotional and psychological aspects of the breakup are not likely to make things easier. Which parent the kids will live with, whether support is paid as alimony or child support, and especially the kids' lifestyle with each parent deserve special attention.
Separation agreements often include provisions for job training or school tuition for the partner re-entering the work force. Effort spent learning new skills that will increase your income potential can turn out to be one of your more valuable assets. Don't discount it.
Alimony Versus Child Support
If you're starting a breakup and you're just shy of ten years together, consider staying together until you reach the ten-year mark. Ten years is considered in many states a long-term relationship and could give you an advantage in the support negotiation. Alimony is taxable income to the receiver and a tax deduction for the giver. The amount of alimony you can expect differs from state to state, and often hinges on how long you were together. Child support is not taxable to the receiver and is not a deduction for the giver. Support is almost always limited to a certain period of time. Carefully consider how this timeline factors into your total budget when you plan what you'll do after the separation in your career and retirement savings plans.
You must make your financial decisions unemotionally during the breakup. Bad choices that you made quickly or in order to smooth the breakup in the short term can hurt you in the long run. Don't be tempted to agree with something simply because you want to get through the negotiations quickly.
How Will the Divorce Affect the Kids?
It's natural to want to shelter kids in a breakup by giving them the same lifestyle after you've separated as your family enjoyed before. The reality is that it's at least twice as expensive to run two households as it was to run one. Trying to spend like you did before just isn't realistic. It sounds cold, but you can use the divorce as a learning experience for your kids. This is the perfect time to teach them that safety, happiness, and security are not related to how much income you have. If money management was a strong suit of yours in the past, you have the opportunity to set a good example regardless of what your ex is doing. If you struggled with finances before, turn a new page. Include your kids in your money education and help them learn to stand on their own financially.
