In our world today, we are bombarded with encouragement from people to purchase a home if we have not already done so. It’s the ticket to the American Dream, some say. You’re a fool for throwing your money away paying rent, say others. Why pay someone else’s mortgage when you can pay your own? The spirit of these phrases is probably a good one, but the effect can be harmful if you are not in a solid financial position to afford the home you are purchasing.
If you are coming out of a divorce, you know your financial state may not be as strong as it once was. Not only is your household a one-income operation instead of two, but you have just spent money paying for the costs associated with a divorce case. Some combination of putting items of credit cards, paying out of your savings, and asking family members for loans/gifts probably helped you get through your divorce. Now that you have come out on the other side, people encourage you to buy a home. How should you react?
Watch your bank account before you watch the real estate market.
Buying a home too soon after your divorce can be a terrible decision. I understand you want to do so, especially if you are a parent. After all, if your kids live with you during the week or if you have weekend visitation, you want them to be able to enjoy the benefits of living in a single-family home versus an apartment. Nobody will argue with you that there is something about playing catch in the backyard or setting out a tent to “camp” in the more excellent times of the year that is just wholesome and fun. I don’t think many people would argue that living in an apartment was superior to living in a single-family home.
With all of that said, if you purchase a home too early in your post-divorce life, you may be making a mistake. I reason that while a home is almost assuredly going to increase in value, you cannot judge the transaction just off of this one factor. In the immediate sense, you are more likely to run into costs associated with your home once you buy than when you are renting. While living in an apartment has limitations, it does not have much overhead. Once you buy a home, there is an overhead aplenty to worry about. When your air conditioner goes out, or a bathroom faucet needs replacing, you are responsible for doing so.
If you have money saved for not only a down payment but also for an “emergency fund” over and above that down payment, you are ready to buy a home. Otherwise, you are asking for trouble in the form of anything and everything that could go wrong when it comes to your new home. It’s one thing to struggle to pay your rent. The risk there is relatively low regarding future debt and credit issues. It’s an entirely different proposition altogether to take out a home loan worth hundreds of thousands of dollars and not be able to pay that back.
Give yourself some time to unwind after the divorce before making any decisions.
Whether you feel great now that your divorce is over or you think crummy that your divorce is over, you should take some time to sort out your emotions before making any critical decisions. I mean this, even if you do not consider yourself very emotional. You will feel something after your divorce. I would never advise someone coming up with a dynamic process to decide on something as big as buying a home immediately.
First of all, you will likely be living by yourself as a single adult for the first time in a long time. If your spouse has primary conservatorship of your children, you will go from a home with multiple people in it to just you. Before you start to consider getting back into the dating world, you ought to consider where you want to live. If you would prefer to live close to your children, you should learn about the area of town where they live. The worst thing you can do is buy a house and then realize that you do not like the location or the home itself a few months later.
Secondly, you need to continue living on a budget. I advise clients to think and plan out their monthly budget. It may be the last thing you want to think about in a divorce, but it can help you live more comfortably knowing where each dollar of your income is going before the month even begins. Now that your divorce is done, you can continue living on a budget and planning to see how far your single income can go as you start to pay child support, spousal maintenance, and any other cost associated with divorce.
Once you have returned to your everyday processes in terms of your thoughts and learned how far your dollar could stretch in your post-divorce world, you are better equipped to buy a home. One last thing that I will point out is that you should not make a rash decision to purchase a home just because you think your children will enjoy living in a house more than an apartment. That may very well be true, but it should not be your guiding principle in your house hunt. Remember- you make many decisions for your children because you know what is best for them. Your overreaching and buying a house you cannot afford because you think your children will enjoy it will come back to haunt you.
Introducing the topic of Retirement Savings
An entire life’s work (literally) of saving for retirement could be destroyed in whole or in part because of a divorce. I don’t make this statement to scare you or intimidate you in any way. I bring it up as a reality of divorce and a consideration for you to make as you approach this process. Divorce will impact your retirement savings in some way, shape, or form. The extent that it will be affected differs on a case-by-case basis. We hope that by learning as much as you can above retirement savings before your divorce, you can be better prepared to make decisions on this subject.
It is pretty straightforward that the money you save for retirement now is intended to grow over the years between today’s date and the date you retire. Any benefits you acquire throughout your marriage are likely to be considered community property and subject to division in your divorce. The government offers you tax benefits for saving money but penalizes you if you take your retirement savings before a certain age in some circumstances.
Your divorce will also be impacted by the type of retirement accounts you and your spouse have. In tomorrow’s blog post from the attorneys with the Law Office of Bryan Fagan, PLLC, we will discuss some basic concepts in retirement as we introduce this topic to you all.
Questions about divorce, real estate, retirement savings, or anything in between? Contact the Law Office of Bryan Fagan, PLLC
If you would like to meet with one of our licensed family law attorneys, please do not hesitate to contact the Law Office of Bryan Fagan, PLLC. One of our licensed family law attorneys would be honored to meet with you in our office to discuss your situation and to provide you with advice. We represent people in our community just like you and would be honored to speak to you about the services we can offer you and your family as a client of ours.