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To Keep The House or Not To Keep The House? - Hello Mojo Magazine

To Keep The House or Not To Keep The House?

It’s a very good question

Some smart advice from Financial Expert

There is rarely anything easy about divorce. In even the most friendly of separations emotions run high and the formalities of dividing up the assets can be difficult.

In so many cases the older you are when you divorce the more difficult this financial parting becomes. Generally there are more assets to divide so there is likely to be more at stake.

Acclaimed financial expert, author and presenter Suze Orman has written many articles on the need for women to take control of their financial future and understand their finances… especially when it comes to divorce!

In an article on her blog www.suzeorman.com titled A Divorce Settlement Mistake I want All Women to Home in on, Orman offers some wise words in particular about one divorce habit that many older women have that can be financially detrimental in the long term.

Keeping the House!

“I get it. You love your house. And the memories. To say nothing of the neighbours and neighbourhood. And while you are uprooting your personal life, retaining the familiarity and embrace of your existing home is a strong pull,” says Orman.

Orman points out that although keeping the family home may be emotionally appealing for many it is not necessarily financially smart in the long term as the decisions that you make throughout your divorce settlement will have a major impact on your quality of life in retirement.

Orman’s concern is a real one. Research by the Australian Institute of Family Studies found that women fared particularly badly when it comes to retirement savings. The average woman has less than half the superannuation of the average man, with lower wages and time spent out of the workforce limiting her ability to save. This is not a good thing when it comes to retirement!

And this is one of the reasons why Orman believes that keeping the family home can often be financially crippling for women – especially older women.

Orman suggests that before you start fighting for the house in your divorce settlement that you or a trusted financial advisor do a few key things:

  1. Create a monthly housing cost estimate if you were to maintain ownership of the family home.
  2. Consider all overheads carefully and add them up. Be sure to include mortgage repayments, insurance, utilities, taxes and ongoing maintenance costs.
  3. Factor in the unexpected. Orman recommends that you then add on another 10-15% a year to cover bigger ‘surprise’ issues that might present themselves.

“Now take a deep breath and honestly look at your monthly cashflow,” says Orman. “Can you easily handle the cost? The worst thing you can do is stay in a home that is a financial stretch and stress”.

The other main concern that Orman has is that keeping the family home does not (in most cases) generate an ongoing income.

“A home does not pay your bills in retirement. Your home is an asset, but it is not something that produces a monthly income,” says Orman. “The bottom line is that giving up your rights to all or the bulk of retirement assets in exchange for keeping the house can be a dangerous move”.

Orman suggests that women especially older women tread carefully when trying to hold onto the family home and to seek expert advice and to try and keep their emotions in check. She encourages women to look to their long-term financial future without the financial shackles of the old family home.

Trust me, not having to worry about maintaining your too expensive old home will be liberating, and it will help give you the emotional space to step into your new life with more confidence and openness. It is also a major step in helping you land in retirement in good shape”.

Hear more from Suze Orman at: