It's true: breaking up has many unintended consequences. That's not to say you should stay in a bad situation to avoid those results, but you need to be aware of them before making any major decisions.
In her book, esteemed bankruptcy expert Elizabeth Warren writes about the two-income trap. The premise is simple: if it's easier to survive on two incomes when a couple moves in together (or gets married), it's more difficult to afford things when that same couple splits.
It's more difficult, however, during the breakup phase. Why?
Living Solo: Easy
Let's walk through it. When a single man or single woman can live on their own, they are accustomed to the inefficiencies of it. They don't buy the two-packs or multi-packs of meat at the store. They get the more expensive (per-ounce) milk cartons. They have budgeted for the rent and utilities payment. Typically, they can live within their means and be self-sufficient.
Moving in Together: Easier
When that same person, or two people living solo, "merge households," great efficiencies start emerging. It's now possible to split the rent. The "family pack" of lunch meat is a better bargain than buying the smaller pack, just like the larger size of milk carton is a better value.
Suddenly, money that would have been spent on the other half of rent is used to purchase things that are not really necessities: iPods, Tivo, media center, that new Blackberry or Treo phone. The lifestyle changes. New (bad) spending habits are formed; savings doesn't occur. If that same "efficiency surplus" from living together was pocketed in a savings account, many more people would be better off. Sadly, the average consumer doesn't save.
* The couple is now stuck in the "two income trap."
The longer the couple is living together -- whether married or not -- the greater the chances are one of life's setbacks will hit one of the people involved. When this happens, people can choose an easier path or a harder path. The easy choice is to maintain the lifestyle they're used to with the higher efficiencies of joint living and charge things, incur debt. Harder is to cut back spending, tighten the belt. Most people choose "easy" and fully intend to repay the debt once things go back to the "good old days" of two incomes.
Once an episode like this happens, there now is a debt load to carry around for the remainder of the couple's time living together, which in most cases is (cynically) finite in duration. Even when the crisis passes and both people are humming along at "efficiency" income-producing status, there's a new factor: minimum payments on the debt. (for reasons discussed elsewhere, people do not typically pay down debt by making larger payments; that would require cutting back and sacrificing lifestyle.)
Splitting up: Hard
At some point, all good things must come to an end. When those same two people decide to split or divorce or separate or a trial separation or whatever you want to call it, it's very difficult to go back to "living solo" efficiency.
Even if the two people could each go back to "living solo" and cut back on their lifestyle choices, there is now the debt incurred during that unfortunate episode described above. And, if they were together long enough, that debt is in both of their names, on both of their credit reports.
For this reason, the divorce or break-up now has a component of financial hardship. Each of the two people who were both financially independent when they first met are both struggling to make ends meet. On top of that, they each have a crushing debt load burden, (not to mention the emotional stress and strain caused by both the falling out and the collection calls).
As a result, what started out as two well-run financial systems are now two badly broken cash flow problems, with the need for debt relief for two people where there was none before. These are the unforeseen consequences of a relationship that didn't work out, and these are the things that the author can help put behind so that both parties can start the road to recovery, the road to financial independence and self-sufficiency again, and the path to a fresh start.
[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, or any of its affiliates, shall have any liability stemming from this article.]
Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.