Getting a Divorce & Starting Over... need some options

**wjcalderon** · 03-11-2014, 03:10 AM

Don't touch your 401k!

I don't think it would be a good idea to take out a loan, either.
Why would you want to make loan payments (with interest) instead of making payments to her (without interest)?

I understand your wanting to make a clean break and not have to keep owing her money, but since the agreement is 0% interest, I would just keep plugging away.
If at any time you have extra funds (bonuses, gifts, etc.) you can increase the payment and knock it out a little faster.

Good luck with your new life and try to steer clear of "strange women!"

**MonkeyMama** · 03-11-2014, 05:11 AM

I'd take out a loan. Heck, I'd take it from the 401k if you couldn't do the loan. But I think borrowing from your home is an infinitely better option. You would still have ample equity.

It's not generally advice I would give. But I think your mental health is more important than taking 4 years to pay off wife. I have seen some pretty long, drawn out, bitter divorces. If I were you, I'd do whatever I can to pay off wife and to move forward with life. Not having to think about paying her for the next 4 years would be priceless.

Good Luck!

**rennigade** · 03-11-2014, 05:20 AM

Make the payments over the 4 years...thats the way to go...unless you cant stand making those monthly payments?

Also, congrats on only have to pay $40k...that seems pretty low considering what you have. I guess she also had about as much as you did already.

**feh** · 03-11-2014, 06:07 AM

Originally posted by wjcalderon View Post

Don't touch your 401k!

I don't think it would be a good idea to take out a loan, either.
Why would you want to make loan payments (with interest) instead of making payments to her (without interest)?

+1

Just pay her from your earnings over the 4 years.

**Bob B.** · 03-11-2014, 06:33 AM

How about this -

1. Pay her 10K (out of your 12K savings) right now.

2. Set up an automatic monthly transfer of $833.33 from your checking account to a savings account.

3. Pay her 10K in a year, and in two years, and in three years.

It's the same basic concept as paying a loan, only without the interest. Plus, you really only have to think about it once per year.

**Inigo_Montoya** · 03-11-2014, 10:46 AM

Having gone through divorce myself, and literally started over well in the red and my credit score trashed due to foreclosure, consider yourself lucky my friend.

That being said, I think if I woke up in your shoes today...

Given your net income, and your mortgage/car situation, you ought to have a pretty significant amount left over every month to go towards savings. As long as your job is stable, I would feel pretty comfortable with taking $10,000 out of your savings in the short term. Long term, I would look at the origination fees on a second mortgage in conjunction with interest rates and do the math to see if the mortgage would be cheaper than the $7,500 in penalty you'll pay to touch your 401K, and then do whichever option is less expensive. Either way, I'm going for the clean break, but as painless as possible.

You don't need this woman to cloud your future relationships moving forward. Nothing like thinking about getting married again in 3-4 years, and having to cut the ex a $10K check at the same time. That's not a can of worms you want to open.

**New Life** · 03-11-2014, 01:37 PM

First off THANK YOU to each one of you for your input. I figured 100% of you would say NEVER TOUCH YOUR 401K, however I am surprised by those who actually understand the importance of a clean break. Sure it may cost me an extra 10K up front, but my instinct says that it is actually worth it to start fresh.

I liked Bob & Inigo's thoughts on giving her $10,000 right away from savings. I would already be a quarter finished without touching any of my long term assets. I would be able to build that back over time.

I know the smart plan would look like this:

#1. Max out 401K each year first
#2. Add $833.33 to a savings account in my name each month.
#3. Pay as much as possible on house payment since it has highest interest.
#4. Pay off the truck since it has next highest interest
#5. Then on day 1459 (last day of the 4 years) write her a check which would give me 4 years of interest.

I welcome more thoughts from others, but as of now I am leaning towards the following plan.
Current Plan
#1. Write her a check for $8000 (leaving $4000 in savings just in case)
#2. Cut a check each month for $500.
#3. Any time I build the savings back up to $8000, write her a check for around $4000 of that.
#4. Once I have her around half way paid off I will then look at removing enough from the 401K or getting a small loan to cover the final $20,000 or so. Less of a long term hit, and still getting her out of the way long before I would plan on getting serious with anyone else.

I may also consider starting a small side business to generate extra revenue. I have no idea what yet, but even 2 or 3 hundred extra a month will help chip away at that total.

**HappySaver** · 03-11-2014, 02:28 PM

I think it's a mistake to sacrifice your EF. How much is 8 months expenses for you? Not a good idea to put yourself at risk by going below that.

I like your "smart plan". Besides being better for you financially, it actually gives you the least contact with her. Just set up the auto-payment to the separate savings account, and write her one check. If you continue to save, you will likely be able to pay her off sooner.

If you really want to just get it out of the way, a 2nd mortgage is a better option than touching your 401k. You have enough equity where it shouldn't be a problem. Maybe you can refi the 1st mortgage to $105k at an even lower rate?

**bennkar** · 03-11-2014, 08:39 PM

OK, I just had to answer this as when I divorced (I was 42 and married 15 years) I paid my wife $40,000 over 3 years as part of the divorce settlement. (YES... the exact same amount! and almost exact same time frame!

) We also had no kids, and I too kept the home. And FYI I did *NOT* pay her off early but right on schedule.

That said... I don't see anyone mentioning the easy solution to this. You are living by yourself in your old house, why don't you rent out a room or two? I did this for 2 years to help tide me over while I was sending her $1,000 / mo. Yeah, its not the best having a roomie, but it can work. Be picky, ask for a lower rent than most people would get and you should have plenty of people to pick from. Set up your lease as a month to month and make this a positive for the roomie. That allows you to ask them to leave if you determine its not working out (and the same for them).

Finally, I can't say what its like for you, but the divorce was the best thing to happen to me. Really. Stress is gone, savings are way up, if I had to I could retire now with my house paid off - 9 years later. I'm still working as I want a more secure retirement, and I like the benefits, but after being near the bottom a decade ago... now things can't be better. If you keep your head during the coming few years... you'll come out golden.

Originally posted by New Life View Post

My wife of 15 years has decided that she no longer wants to be married and needs her freedom. While it sucks for me, I will figure it out and make the best of it. I know this isn't the site for mental help, I will get that in the form of beers, friends, and strange new women in time. For now I need some thoughts on how to handle my overall finances, which is why I am here.

I will start with a very brief snapshot of my current situation (post divorce)and then let you all tear me apart from there.

#1. 35 years old
#2. No kids.
#3. My home is worth $145,000. I owe $65,000 @ 4.5%
#4. Vehicle loan with $15,000-ish owed still at 1.25%
#5. $12,000 in savings
#6. Annual Salary $130,000
#7. 401K is slightly over $300,000
#8. Student loans paid off, no credit card debit, no other debit that I can think of.
#9. No other real assets either that I can think of.

When the divorce is final I will owe the lovely misses (the darling angel of mine) $40,000 cash to be paid over 4 years @ zero interest.

I will personally want to get that $40,000 paid off right away. Should I dip into my 401K for $40,000 and take the tax hit 25% at tax season but have her out of the way? I would still have plenty in there. I am young so it will grow back at a pretty good rate. With her being paid off I will be able to focus fully on the remainder of the home loan and the vehicle loan without worrying about getting in over my head. I get the pros and cons of taking out of 401K now and how it will affect me in the long run, but I am also weighing the factor of not owing another person such a large chunk of money.

Also with her out of the way I will have a stress free life and I will still be able to have enough money each month to have my house paid off around the time I am 40-42 years old. If I am in my early 40s with absolutely NO debit then I should be able to really set a ton aside for retirement at that point.

**MonkeyMama** · 03-12-2014, 05:03 AM

Originally posted by HappySaver View Post

If you really want to just get it out of the way, a 2nd mortgage is a better option than touching your 401k.

Agreed. I just wanted to be clear that you could pay 50%-ish on taxes and penalties on a 401k withdrawal. Even if you whittle it down to $20k, then you would have to withdraw more like $40k to cover the taxes and penalties. I'd completely cross the 401k off of your plan.

**LivingAlmostLarge** · 03-12-2014, 05:11 AM

Can you borrow from any friends or family? I'd also take some savings and use second mortgage. The peace of mind and not being tied to the person or having this weight on your mind/back is well worth it IMO. But everyone has to decide what's most important. I'd take $6k and pay that now, keep half in savings and borrow the rest from second mortgage.

**Eagle** · 03-12-2014, 05:20 AM

Sorry you are going through this New Life.

Having a close relative who went through a divorce in 2013 and finalized it Dec of last year... I understand wanting to pay the 40k ASAP.

At 130k in your salary though I'd say financially the best decision is as others have suggested to just pay monthly. Cut down your expenses and you should be able to pay 40k off in a year maybe a year and a half. I would try to avoid making an emotional decision (taking out a loan or dipping into your 401k) about money at this time.

Best wishes to you. Hang in there things will get better.

**Gailete** · 03-12-2014, 03:40 PM

I would not under any circumstances pay her off early or in any way other that what you need to pay monthly to get it paid off in the 4 years. Without kids, it might not happen as much, but it is not unheard of for divorced folks to go back to court and try for more moola. If you pay her off $10,000 at a crack or even the full amount, she and the court can use that as a reason to say you could really afford to pay more as you must have had something stashed away that they hadn't found during the initial divorce findings.

I hate these games that spouses play. My first husband sued for divorce, wanted the kids and the house. Sadly he wanted the kids for the child support money only as he admitted at one point he didn't care where the kids stay but he wanted custody (ie. support money). The whole divorce was structured with the help of his parents and lawyer to take me to the cleaners and make him some extra income. It was heart wrenching that my boys were being made to be pawns in that game as they tried to make me out to be an unfit mother since I worked as a nurse--you figure it out! All I can say is I would follow the letter of the law and the divorce decree and don't give her any ammunition to try for more.

**snafu** · 03-16-2014, 03:42 PM

1st, I hope you have already protected yourself and your credit by cancelling any CCs that she has shared or any access to financial assets or information not court assigned. You also need to change Will and beneficiary on all legal documents. From a business-like perspective, I'd chose automatic payments of $ 833. with an adjustment in December. With interest rates so low just now, I suggest checking for best rate for a no fee, no cost Personal Line of Credit, 1st segment $ 10 K. Your income should support the payments and allow you to set aside $ 833. per month for year two. I'd open a dedicated Investment account with a Vanguard [or low fee, low MER] Index Fund.

I wouln't go for a 2nd mortgage because of the costs, fees charges...whatever their terms for transferring sums from your account to their's

I wouldn't pay $ 40 K upfront as she will surely be back for more...no risk. I'd set it up on automatic, no cost, account to account transfer without your having to input information more than once.

Getting a Divorce & Starting Over... need some options