When it comes to financial security, women often get the short end of the stick after a divorce. Well, more so than their male counterparts. To add fuel to the fire, women are also the primary caregivers when it comes to their children and/or (aging) parents. Thus making them more likely to take time off work to fulfill obligations and undertake more responsibility.
We spoke to Dipika Jaikishan, Co-Founder and COO of Basis to understand more about how a woman can deal with the financial aspect after a divorce. Here's what she had to say:
There are several reasons why a woman isn’t usually on par with her male counterpart in terms of career trajectory, the least of which has to do with capability:
- When it boils down to choosing between the two sexes, it is primarily the woman who ends up quitting her job or taking an extended leave of absence, for the betterment of the family.
- If a divorce is a precipitating event that sends a woman back to the workforce, aside from bias and unequal pay — gaps in work experience, or time taken off for familial responsibilities are not accounted for during profile evaluation.
- In the case of extended absences from the job market due to health or child-care, women often end up finding themselves at the receiving end of mandates like upgrading existing skill sets or finding alternate career options altogether.
As a result, a woman finds that her lifetime earnings and therefore retirement savings are heavily affected and will be significantly lower. However, there are a bunch of things that women can do for themselves to get their affairs in order.
Getting a sense of your existing net worth
During a divorce, assets accumulated across the tenure of a marriage are usually divided. In lieu of this mandate, It is super important for women to be sure that the appropriate action has been taken — canceling joint accounts, retitling assets under one name, updating account beneficiaries, reviewing existing insurance coverage, and updating estate/property plans, to name a few. An in-depth understanding of existing investments is also super critical. These could be EPFs, PPFs, Mutual Funds, Equity, Gold, and other investments.
Dissecting your monthly income
While some women do have a source of income at the time of a divorce - which is well and good; there are others that do not. There are also women who earn more than their spouse, and yet decisions regarding monetary matters involving the household and other expenses aren't made by them. The majority of women who go through a divorce, however, find themselves in a somewhat rocky boat. They may have deprioritized their career to have children, earn a lower income than their spouse because of their years out of the workforce, or have no means of supporting themselves. By working closely with a financial planner and an accountant, one can calculate how much income is required on a monthly basis, to ask for the mandatory spousal support needed.
Securing required insurance policies
In most cases involving married couples, one individual’s health insurance policy does provide coverage for their partner. However, it is imperative for women - married or not, to have health insurance coverage of their own. A good amount, to begin with, is Rs 10L coverage. Chances are, being the primary caregiver to kids and aging parents, that policy will come in pretty handy when the time comes. A critical illness policy also ensures financial protection in the case of being diagnosed with any major illness.
Trusting the right sources and planning your financial future with an expert
A professional financial advisor or even a certified financial transitionist can always help sort through money matters and plan for the future. A professional makes sure that any thinking is long-term and involves taking advantage of all the options available to save for retirement; as opposed to someone known personally, whose focus is immediate well-being.
Although it can seem like a long and tedious process, becoming financially independent (irrespective of circumstance) is a journey filled with learning. And while things like divorce, untimely deaths, medical emergencies, and sudden expenditures are unprecedented and unfortunate — they are a part of life. Besides, there’s nothing one cannot do if they set their mind to it. Especially when it comes to money. Besides, we’re always here to help!