In 2019, the inflation rate in the United State was 1.8% and decreased to 1.2% during the 2020 pandemic. Then, in the summer of 2020, the inflation rate began to increase drastically and reached 4.7% in 2021. Currently, in 2022, inflation rates have peaked, reaching 9.1% in June 2022.
Inflation can affect the cost of living. Specifically, food, gas, and utility costs are higher, and interest rates on loans (for homes, cars, etc.) are significantly higher—mortgage rates reached over 7% in October 2022. These increases in costs are also made more difficult as there is no increase in wages and salaries.
How Inflation Can Impact Your Divorce
If you and/or your partner are considering divorce, you may worry about how inflation and the current market will affect your divorce. Below, we discuss the implications of inflation on divorce.
- Affecting overall divorce rates. Historically, divorce rates decrease during times of economic crises or recessions. People often delay their divorce during these times because of the changing landscape and uncertainties or worries about their financial future. For example, divorce rates decreased by 25% during The Great Depression and increased in the 1940s. During the 2008 recession, divorce rates also decreased—this time by 4%. It is important to note that we do not have information about how divorce rates have been affected by the current market and inflation.
- Increasing the value of assets. Just as your expenses have increased, the value of your property and other assets has also increased. Many homes are selling for well above the asking price as well as their initial purchase price. During your divorce, you should have your assets appraised by a professional to ensure the property division process is fair.
- Complicating your financial future. While assets may have increased in value, you will have to account for the increase in food, gas, utility, and other costs. The housing market for purchasing and renting homes (or apartments) is not only competitive right now but as we mentioned, home prices have increased. You should create a budget that accounts for the increase in expenses to determine whether you will need alimony as well as recognize what expenses you will now have to cover without your spouse’s income.
- Factoring into child support and alimony determinations. With increased expenses, childcare costs and a spouse’s need for support may increase. However, the court considers a person’s ability to pay as well as their income when calculating spousal support and child support. Thus, unless the spouse who will pay support has received a raise or inflation-related pay bump, you may not see a substantial increase in the amount of child or spousal support you receive.
Get Legal Help
If you or a loved one are filing for divorce, the attorneys at The Neshanian Law Firm, Inc are equipped to help you understand your legal options and fight to achieve the best possible case results. Our attorneys advise our clients on how certain factors can affect the court’s determinations, including the impact of inflation on your case. We can also connect you with helpful experts, including forensic accountants and other financial experts who can help strengthen your case and offer you counsel concerning your post-divorce finances.
To schedule an initial consultation, call (949) 577-7935 or reach out online today.