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 negative if you are not in a solid financial position to be able to afford the home that you are purchasing.
If you are coming out of a divorce then 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 are encouraging 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 wanting 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 cooler times of the year that is just wholesome and fun. I don’t think there are many people who would try to 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. My reasoning is 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 its limitations, it does not have much overhead. Once you buy a home there is overhead aplenty to worry about. When your air conditioner goes out or a bathroom faucet needs replacing it is you who is 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 to you there is relatively low in terms of 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 feel crummy that your divorce is over, you should take some time to sort out your emotions before you make any important decisions. I mean this even if you are someone who does not consider him/herself to be very emotional. Believe me, you will feel something at the conclusion of your divorce. I would never advise someone coming up an emotional process to immediately make a decision on something as big as deciding to buy a home.
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 actually want to live. If you would prefer to live close to your children then you should learn the area of town where they live. The worst thing you can do is to buy a house and then realize a few months later that you do not like the location or the home itself.
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 actually want to think about in a divorce but it can help you live a lot 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 that is associated with divorce.
Once you have returned to your normal processes in terms of your thoughts and you have learned how far your dollar can 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 a lot of decisions for your children because you know what is best for them. Your over reaching 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 effected differs on a case by case basis. Our hope is 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 during your divorce.
It is pretty straightforward that the money you save for retirement now is intended to grow over the course of the years between today’s date and the date that you retire. Any benefits that you acquire over the course of your marriage are likely to be considered community property and will be subject to division in your divorce. The government offers you tax benefits for saving money but will also penalize you if you take your retirement savings before a certain age in some circumstances.
Your divorce will be impacted also by the type of retirement accounts that 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 that we can provide you and your family as a client of ours