Divorce is very common and there are many things that can bring a couple to get divorced. Luckily, my parents never got divorced so I never had to experience it first hand. Since I will most likely get married sometime in the future, I wanted to look into financial independence, if it can really lead to divorce, and how divorce can affect your financial independence when you are already retired, or still working towards it.
I have found that while financial independence may aggravate already known issues in a marriage, it does not necessarily lead to divorce. Financial problems that lead to divorce were most commonly related to differing views of finance, lack of communication with spending, or high costs in health care and other expenses. If you are already financially independent and going through a divorce, you should cut back on spending and possibly pick up a job depending on how costly it is. If you are not financially independent during or before the divorce, you may need to push off your early retirement date a couple of years until you get everything in order and are comfortable with the state of your finances.
From what I found, I wouldn’t necessarily say that becoming financially independent leads to divorce. A study found that out of 11 different commonly reported marital problems, financial problems was ranked 5th out of those 11 , source . Financial independence wasn’t specifically mentioned, however it would fall under this category. But financial independence may just as well solve some of the problems in this category. In the study, many participants said the financial problems were in their differing views of finance or that they were linked to other issues such as health costs or substance abuse. Sadly, financial problems may aggravate or trigger some disagreements that lead to the breaking point . If you and your spouse made it to financial independence together, through all of the saving, investing, and budgeting, it is likely some other factor.
Relationships and marriage are very complex so I’m not going to try to dissect every little part, but I will try to give some examples I found while scrolling through forums. One common one is if you retire early after achieving financial independence, you are around each other a lot more than you are used to. It can be tough transitioning if you both worked normal 9 to 5 jobs at separate employers and didn’t really see each other until you get home after work. After you retire, you are suddenly around the other person all of the time unless you establish certain boundaries like having separate offices to escape to if you need a break or running errands and making plans separately and not as a unit.
Another scenario I found is if your spouse is all on board to achieve financial independence and after you make it, their ideals change and they begin to spend more than you can afford. This can easily lead to disagreements that end up being the straw that breaks the camel’s back.
A similar scenario is one where you and your spouse are seemingly on the same page to work toward financial independence but they might not have shared their true feelings on the matter. They may cut back on spending but are unhappy with the restrictions and as a result, they may blame their unhappiness on your goal (that used to be theirs as well) of achieving financial independence.
Again, I don’t believe financial independence is the root cause of divorce, but it can put stress on the cracks in the relationship or marriage that are already there . I do believe it helps to talk through issues, whether it is just between you and your spouse or if you need a marriage counselor to facilitate. Divorce isn’t fun but sometimes it can’t be avoided.
If you are still in the process of achieving financial independence before and after the divorce, you will likely have to push it back a few years. You can most likely continue saving and possibly cut back on spending even more depending on how costly the divorce is. Cutting back on spending is the most important thing . You may be accustomed to a more expensive lifestyle than you can afford. Try to scale it back a little at a time. It can be tough to start living a cheaper lifestyle when you are used to the more luxurious, expensive, and often exciting option. Eating out less often is always good. Cook at home when you can and you may be cooking for fewer people than before which generally cuts back you food costs. Also, your monthly utilities and housing will likely go down if you now have your own place, there are fewer people living with you, or you split costs with a roommate or two.
If you have debt, focus on paying that off first . Don’t miss monthly payments for anything and if you have to pay alimony, make sure you account for that in your monthly costs. You may have to be more aware of your monthly spending depending on the circumstances of your divorce. If you are having trouble making ends meet month to month, meet with a financial advisor to talk about your expenses and to see where you could cut back or take action. Be careful of the financial advisor you choose as they might not have your best interests at heart. Divorces are extremely draining so it is important to take care of yourself as well. Don’t put too much pressure on yourself or lose hope. Just chip away each month. Continue to save, budget, invest and you will be rewarded in the long run.
During a messy divorce, I would just go into damage control. If you are already retired, maybe think about picking up a job after the divorce depending on legal fees and how much you lost of your savings and investments . If you are just as well off as before the divorce I wouldn’t worry about it. You may also need to cut back on spending, depending on divorce costs, until you can build up your savings and investments a bit more. If you have not yet reached financial independence, it might set you back a few years or so depending on the outcome of the divorce. Your cost of living situation also depends on what happened in the divorce. Hopefully, your cost of living went down but there are always scenarios where it increases after the divorce is finalized. It also depends on which route you take in terms of living situation, some of which I will go over next.
The first scenario is if you owned a house together and decided to sell it and divide the proceeds, you then have to find somewhere to live which means buying another house/condo/apartment, renting an apartment, or staying with friends and family. Staying with friends and family is the cheapest option assuming you don’t have to pay rent. Renting is the most common while buying a house, or similar property, would likely be the most expensive at the time. It could pay off in the long run if you don’t plan on moving in the somewhat near future or if the property value increases from when you bought it. Another similar scenario is if you own the house together and it goes to your spouse in the divorce with no proceeds going your way. You are basically in the same boat as in the above scenario with a little less cash to figure it out. The last scenario is if you owned a house together and it goes to you in the divorce. You don’t have to worry about renting and your monthly expenses will likely go down as a result.
Traditionally, after a couple gets married, they open a joint bank account and their spending in their individual accounts can taper off or disappear completely. Having a single joint bank account can cause issues in any marriage if the couple is not communicating about spending and finances clearly . In many cases, having a single joint bank account can cause you or your spouse to feel a lack of financial independence (not the FIRE kind). I would advocate for separate accounts. You get to manage your own finances which gives you a degree of freedom. A joint account is fine but I don’t think the bulk of your money should be in there . Just enough to cover monthly shared expenses such as food, housing, utilities, etc. Having separate accounts and only putting in the minimum in a joint account also makes handling funds in the event of a divorce, if it comes to that.
I would hope that you and your spouse are generally on the same page with your views on finance, but it’s fine if that’s not the case. It makes it a lot easier if you think in a similar way about money and have the same spending or saving tendencies. They won’t feel pressure to change their habits if you bring it up and it won’t turn into a point of disagreement or resentment. If you do have different views on finance and money, don’t force them to be on board with your money goals . You can choose to pursue them on your own and if they feel compelled, they can join in to some degree. There is no point in forcing your spouse to pursue financial independence with you if it will hurt your relationship.
Divorce usually isn’t fun. It is stressful and if it can really break your spirit if it is a bad one. Just take it one step at a time and try to think positive. Divorce can be an enabler for financial independence. You can take control of your money and do whatever you want with it. Save 90% of your income. Take a look at your investments. Spend on things that make you happy. Don’t let divorce bring you down.