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How Divorce Financial Planning Could Help in Your
Divorce
Graph of Income and Expenses After Divorce Show Whether You Can Afford to Keep the
House
John and Jane are 40 years old and have two children. They own a home worth $165,000
with net equity of $77,500. Their IRAs and 401(k) retirement plan total $165,500
in value. John earns $90,000 a year and has take-home pay of $68,760 a year. Jane
has never worked outside the home and has no job skills, but she hopes to get a
job for $5 an hour with take-home pay of $8,900 a year.
The following settlement has been suggested. After the divorce, Jane and the children
will live in the house, which will be deeded to her. She will also receive $44,000
of the retirement moneys and John $121,500, thus dividing the assets equally. John
will pay Jane alimony of $600 per month for 5 years and child support of $225 per
month per child. He will also pay college costs which start in 4 years.
John's expenses include his normal living expenses, child support, alimony and college
costs. Jane's expenses include support of the children and are reduced when each
child leaves home.
This appears to be a reasonably fair settlement. However, an analysis creates the
financial future illustrated in the following graph. Jane's assets will be completely
depleted within seven years while John's investments will grow dramatically.
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