Rising inflation doesn’t seem to be anything that will be going away in the near future. Most people associate it with higher gas prices and grocery bills. However, inflation (defined by the Federal Reserve as a “general increase in the overall price level of the goods and services in the economy) affects just about every part of our lives – including divorce.
In fact, the effect or higher prices and strained finances can even lead to more divorces. Whatever the reason(s) for your divorce, you need to consider inflation as you negotiate your agreements. Let’s look at a few examples.
Child and spousal support payments
If inflation continues to increase, the child and/or spousal support payments that are ordered may be steadily become worth less. A spouse seeking these payments may want to negotiate a slightly higher amount than they now require or ask for regular review and possible modification of these orders. Sometimes, an annual cost-of-living increase or escalation clause is negotiated into to settlements.
The value of some of your assets may have increased with inflation. However, it depends on the asset. Housing prices in some areas have dropped significantly. We’ve also seen the value of many of our stocks and other investments (including our retirement accounts) drop over the past year or more. However, these will likely head back upward over time. These are all things to consider as you divide your assets.
Can you inflation-proof your divorce?
Not even world-renowned economists can predict with certainty what will happen over the next year or few years. However, by having an experienced financial advisor (your own – not the one you and your spouse have shared) as well as sound legal guidance, you can better work toward agreements that will put you in a better financial position after your divorce.