Selling an engagement ring can jump-start
savings
Jul 3, 2018 @ 2:03 pm
It's fitting that as the country celebrates
Independence Day this week, a new study documents the experience of more than
1,700 women going through the process of divorce. While many face financial
obstacles in living on their own, nearly half of them view it as a positive
opportunity to reinvent themselves.
Both the source of the study and some of the
recommendations are surprising.
Worthy, an
online auction marketplace for pre-owned diamond jewelry, joined forces with
Laurie Itkin, a certified divorce financial analyst, to survey more than 1,700
women from across the country about their financial experiences before, during
and after divorce. Participants in the Financial Fresh Start study were divided
into three age groups (18-34, 35-54 and 55+) and three stages: divorce on the
horizon, in the midst of divorce and "divorced and determined."
When asked about their financial priorities
during marriage, 51% of the women said they focused on paying the bills while
only 14% focused on saving for the future. One in five of the survey
respondents, who included Worthy clients, newsletter subscribers and social
media followers, admitted to relinquishing all responsibilities for managing
the couple's long-term finances.
Being in the dark during marriage, often led
to some nasty surprises after
divorce, the soon-to-be released report found. Across all age groups, the
majority of women said their biggest financial fear when it came to getting
divorced was living on one income, followed by the cost of divorce.
Divorced women are more likely to live in
poverty and receive public assistance than their male counterparts, according
to the U.S. Census Bureau. To face the challenge of living on one income, Ms.
Itkin suggests that more women need to discover ways to leverage their talents
— whether that means going back to work, going to school or launching an online
business — so if divorce happens, they are prepared to support themselves.
For women who are contemplating divorce, Ms.
Itkin recommends taking a couple of years to develop an exit strategy. If women
are blindsided by a spouse who requests a divorce, they need to accept the
harsh reality that child support eventually ends and alimony awards are rarely
for life.
In addition, new tax rules affecting
divorce that take effect next year could potentially reduce future alimony
awards as that money would no longer be tax-deductible to the former spouse who
makes the payments.
As divorce brings about many changes and new
realities for women, many are pursuing professional opportunities again. Over
half of the women surveyed (54%) made a major career change following divorce,
including reentering the workforce, switching jobs, going back to school or
starting their own business. Overall, 91% of women see divorce as an
opportunity to focus on their career, the study found.
"I always encourage women — even those
who are happily married — to work and further their careers despite the lack of
affordable child care," Ms. Itkin said.
Only 9% of women were able to stay at home
post-divorce, suggesting that many women urgently need to generate income after
divorce. That is in stark contrast to married women with children, nearly a
third of whom do not participate in the labor force, according to the Bureau of
Labor Statistics.
"The findings in the Worthy Financial
Fresh Start Study are consistent with our clients' experience," said
Cheryl Glazer, president of the Association of Divorce Planners. "This
study touches upon the key issues that
are critical part of the divorce conversation."
With longer average life expectancies, it is
important for women to start investing so they don't outlive their money.
Divorced women could turn their no-longer-needed engagement ring into seed
money to establish a financial nest egg. However, 64% of the participants
surveyed did not think of their ring as a financial asset.
"Some women mistakenly believe their ring
will increase in value over the next 20 years," Ms. Itkin said. "That
is unlikely to happen."
But if a woman sells her ring for $3,000 and
invests the proceeds in an individual retirement account that earns a 7% annual
rate of return, in 20 years, she will have about $12,000.
Even better, if a woman generates a lump sum
of $2,000 by selling her ring and earns extra income of $400 per month through
a side business and transfers the money each month into an IRA and selects an
investment that returns 6% annually, her retirement a savings would be worth
close to $300,000 in 25 years.
It turns out that a diamond could prove to a
divorced women's best friend after all, by kick-starting her financial
independence.
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