Marital Economy

My phone rang unusually early.
A deep, calm, confident voice inquired:

"Is now a good time to divorce my wife?"
"It is seven o'clock on Saturday. Best time to stay married," I opined.
The man chuckled, but pressed on eagerly.
"The economy. You know I mean the economy. Don’t you read the papers!"
"The bloody Academy again," I thought.

This "recession / divorce" buzz is nothing new. In 2008, the American Academy of Matrimonial Lawyers released a survey revealing that American citizens could no longer afford the luxury of divorcing each other.

The 2008 Academy survey confirmed what intuitively made good economic sense: a time of unemployment, salary cuts and price increases is not at all conducive to splurging on a brand new second household, complete with children's beds, second set of puppies, dishes and linens and toys. There are also expenses for soon-to-be-ex-wife's re-adjustment to re-enter work, and soon-to-be-ex-husband's newly discovered costs of cleaning, laundry, supervising help, and babysitters. The analysis was simple and solid.

Not leaving good enough alone, the Academy re-surveyed. The Academy's Spring 2009 survey uncovered a new and quite different trend.

On March 31, 2009, the bomb exploded. High-end divorces are on the rise, child support modification suits are abundant, and men -- rich and poor -- are back in court trying to modify down the generous spousal support which—they claim-- they can no longer afford to honor. The survey sent the country buzzing about the "good time to divorce."

On June 15, the National Law Journal weighed in, declaring: "Recession Keeps Family Lawyers Busy." Divorce lawyers of America told the reporters that they were "jammed" and that the time was now, and that "you should settle today because tomorrow it may be worth half." The Americans whose "ten things to do before I die" list included ”Divorce My Spouse” cheered up and went divorce lawyer shopping.

The optimistic readership of the National apparently included my new friend -- the man who rang at seven in the morning to inquire about a fiscally responsible way of giving the heave-ho to his wife. The newspapers told him that, since his assets were valued low, his pensions and stocks had plummeted, and his real estate was falling, now was the opportune time for romantic disentanglement.

"So is now a good time or not?" He wanted an answer, and he wanted it to be monosyllabic.

But it’s not as simple as he wanted it to be. In truth, the fiscal ramifications of a divorce depend on a multitude of tangled factors, most of which have no direct relationship with the economy. First, the "best time" for him and the best time for her is almost never the same time, so there can not be such a thing as "a universally good time to be divorced." When the economy devalues marital assets, and your client asks if buying out his spouse is a good idea, the only proper answer is: "it depends."

It depends on the man's current cashflow, on whether the presently devalued asset will ever spring back. It also depends on the opportunity costs of not investing the cash elsewhere; in the case of real estate, it may depend on the cost of providing alternative accommodations for the wife and kids, and on the emotional issues which often surround real estate transactions. All of these are more or less the same issues as the client was facing in the good economy. Then again, there is alimony and child support. In a bad economy the standard of living might go down, and with it the support amount. On the other hand, will paying even the lower amount destroy the now precarious balance of the soon-to-be-ex-husband's recession-weakened business? What if he were to wait to divorce until the wife bites the bullet and gets employment? Even a part-time job might give family court the courage to admit that the woman can fend for herself economically.

"Yes or no?!" the man was no longer calm.
He was quite aggressively insistent. (Perhaps a characteristic that contributed to the apparently delicate state of his marriage?)
"You should stay married," I admitted. "Well, stay married at least until Monday. Have your financial advisor send me your latest statements. I will tell you on Wednesday whether the world economy is ready for your divorce."

The financial goal in divorce is quite simple: to come out better off as compared to one's pre-divorce position. Divorce economics is more about redistributing the family's personal credit card debt than about the surging US national debt. Personal cash flow will matter substantially more than the ups and downs of gas prices. The client's career prospects are much more relevant than the national unemployment average. A skilled divorce attorney will consider the client's personal debt, personal cash flow, career prospects, level of inter-spouse enmity, health issues, presence of extramarital affairs, and the habitual dispositions of the assigned judge.

How about the economy? Not a big deal in The Divorce Game. Don’t worry about it. Really.