After years of being emotionally separated from my wife, we have finally agreed upon a settlement which covers everything from the custody of our son to financial division of assets. Soon will follow the actual filing of the divorce, which matches the settlement terms and is an excuse for the lawyers to charge you again, and the courts official recognition of my divorce.

I have been waiting to share all that I have learned during this process for a long time. I have not shared any of my struggles on this blog previously because I didn’t want to disturb the negotiations of the settlement. The settlement negotiations could have been upended by my writing were my ex-wife or any of her friends to read my blog. It is that serious, even for someone who doesn’t believe in self censorship like me. A settlement is a customized legal document (one reason for the high cost) and just about anything can go into it, which is why you want to be very careful when in the negotiation phase not to disclose or discuss things that could be taken out of context or used as ammunition by another party.

My motivation to write about this however, is not to just share my own experience and my own struggles but to hopefully offer useful advice and a sense of hope for those that are either at the beginning, in the middle of, or have already been divorced. Much of the help you see online for divorce deals with either the legal or the emotional aspects of divorce. I have yet to see a solid and comprehensive review of how to handle divorce financially and how this ties into your emotions and general well being, so I decided to do it myself.

There is some good reason much of what you read about divorce focuses on the emotional aspect. Divorce is a traumatic experience for many, potentially filled with a lot of the emotions and experiences that most of us fear in life: betrayal, mistrust, deceit, blame, vindictiveness and resentment just to name a few. Not all divorces will be ugly but many are. Even those who have a relatively smooth divorce process may hit some bumps in the road along the way that could potentially make the situation deteriorate. As I will show in this series of posts, having your emotional house in order is key to both dealing with the financial aspects of a divorce as well as not letting the divorce rob you of you of a happy life both in the present and future.

We all are emotional creatures and at times we all let our emotions dictate our actions. There is so much help out there for the emotional aspect of divorce because I feel that so many people avoid those emotions. They avoid confronting them and the difficult questions that they will pose, both to others and ourselves. Most people do not want to confront difficult questions about themselves so they avoid them, then react to things based off of emotions they are avoiding, and the cycle continues.

I will talk about emotions often in these posts not just because my own experience was emotional but because emotions are tied to our money for most of us. You may say to yourself that this is not true but I’m not talking about just your annual salary. Divorce can affect not just your gross pay but also your savings, your future savings and what you can provide for your kids. It can dramatically alter your prospects for retirement, career and the quality of life you can live. In this sense, your emotions are tied into your money in divorce because divorce will potentially alter the vision for yourself that you have for the present and future. This is really scary for many people, especially people like me that are planners and like to be prepared financially for life’s challenges.

Your emotions may also be tied to your self perception of your social status and divorce may change your own or other people’s perception of that social status. Besides the “stigma” of just being divorced, the financial situation you find yourself in post divorce may force you to downgrade cars, a home or luxuries like travel or shopping. Many people, rightly or wrongly, have much of their self worth tied up in these material things as they are often used to display social status to others. For some, taking these away due to divorce is a blow to their sense of self worth and self esteem they may never recover from.

Money Matters

So like it or not, unless you are content being a vagabond in the street for the rest of your life, money will matter on some emotional basis for you in divorce, especially if you are the one who has more to lose in a divorce.

I’ve been interested in economics since I first learned how economic calculations that we all do, either consciously or unconsciously, affect the actions that we take both in the short and long terms of our lives. One economics course that I remember in particular was a population economics course. The main issues that this course dealt with were how demographics and population growth changed based on the stage of economic development that a country was in.

One of the big takeaways I got from this course was that decisions to have children and delaying when we have them are profoundly economic decisions. If you ask a childless person on the street why they don’t have kids, the first thing that may come to their mind is not necessarily that it’s expensive, although some will likely say that. Rather, they are more likely to say they may want kids one day but for the moment they are focused on enjoying their youth or their career or any other number of projects that you can occupy your life with.

However this is still an economic decision in the sense that their argument is in favor of maximizing what economists call their utility, or what I like to call their long term contentment. To me this means that most people try to focus on what will not make them happy in the moment per se but what will make them content looking back on the long arc of their lives. When doing that, many of us may say that we wanted to have a bit of freedom in our youth.

It’s also a decision based on the cost of a child, but not in the sense of clothes and food. In the developing world, people tend to have many children. This makes sense because many may be still living largely communal or agrarian lives, so having more hands around to help is logical. Once they are old enough to communicate and do some manual labor, they can contribute to the well being of the family. This makes their cost relatively low assuming you can afford to feed and house them.

In contrast, in Western and economically advanced countries, children require a massive amount of time and human capital investment to be able to function as productive members of society. This includes at least 12 years of school just to have a chance at working survival, let alone even more, and expensive, post secondary education to be able to flourish.

It’s the cost of the investment in advanced economy children compared to developing ones that spurs the phenomenon of having less children and having them later in life in rich countries.

So how does this relate to marriage and divorce? Well like it or not, marriage is as much about love as well as it’s about an economic union between two people. This causes people to perform a similar decision making process in their head to the one that dictates when they choose to have children. If most people want to be married in the traditional sense, meaning that it’s the first step towards having a family, and they end up being incentivized to have children later in life, then they naturally are going to also marry later.

So if people are trying to “maximize their long term contentment” by marrying and having kids later in life, why wouldn’t they be making these same calculations when they are choosing their partner?

It seems that many are. The phenomenon of the wealthy marrying other wealthy has been well documented in the recent past. After going through divorce, I now realize that due to the strong economic union that marriage is, there is a big incentive for you to marry your economic equal. Of course, this is not always the case and a strong emotional relationship can overcome challenges such as finances. There are always exceptions to the rule. But marrying your economic equal puts “skin in the game” for each side financially in the sense that if there is a divorce, each person will have to risk what they worked very hard over many years for.

This may be one reason that contributes to people with post secondary educations getting married in higher proportions and staying married longer than the general population. It’s not just that smart people like each other, they also have a monetary incentive to get together and stay married.

Next Post

In my next post, I will go further into the details of divorce and relationships and show how our vision for ourselves and society’s expectations of us affect divorce rates.

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