Lisa Greene is starting over. Again.
For a time, she lived a fairy-tale life.
The divorced mother of two met a man, and they fell in love. They married. Together, they had another child. They built a million-dollar dream home.
And together, they racked up more than $170,000 in credit card debt.
Then, another divorce.
"Going through the divorce has left me in a financial situation much different from what myself and my three kids are used to," says Greene, 36. "I'm basically starting over and trying to come up with a plan to move on."
Greene is faced with a very different lifestyle: one with little income, lots of debt and no one to count on but herself.
Where will she cut back?
At the time of the divorce, she owed $83,000 of the marital credit card debt, plus $7,000 on a card she had in her name. Greene received $40,000 from the sale of their house, which took longer than she and her ex-husband had hoped and netted a lower sale price than they were looking for. She was planning to use the proceeds toward her debt, leaving her $50,000 in the red.
How she got there
Greene's life wasn't always a money mess.
After her first divorce, Greene was 25 and financially independent. She owned a small home with a small mortgage, had a small car payment and lived a frugal but comfortable life. She was in control of her money and able to buy what she needed for her family.
Talk back: How has divorce affected your finances?
Then she met the man who would become her second husband. He earned a very healthy salary and liked to spend it. She says the kids always had everything they wanted, as did she, with weekly trips to a nail salon, frequent visits to a hairdresser and regular shopping trips for whatever she wanted to buy.
"My ex-husband would say, 'Just buy what you need, do what you need, and I'll pay it, I'll pay it, I'll pay it,'" she says. "I never saw any of the bills. He took care of everything."
In 2005, they decided to build their dream house. The home, worth close to $1 million at the time, had 4,000 square feet with 3.5 bathrooms and was in a rich neighborhood in Connecticut. Then, her husband took a home equity loan for $80,000 to pay cash for a pricey car.
From 3.5 baths to 1
Greene thought his salary had been covering her shopping sprees, but she was very, very wrong. The couple maxed out seven credit cards for a total debt of $173,000.
She's not sure when the finances started to go sour. When they were building the home, their credit was good and their debt minimal, she says.
"We lived a very comfortable life, wanted for nothing, and there was never any inkling of having to worry," Greene says.
Getting control
Though Greene's situation may be extreme, she's not alone.
It's quite common for the family breadwinner to control a family's money. You sometimes hear about older women who, when widowed, have no idea how to even write a check, much less know what assets or liabilities their husbands left behind.
Divorce for women who haven't teamed up with their husbands on the finances is no better.
In the first year after divorce, the ex-wife's standard of living may drop almost 27%, yet the ex-husband's may increase by as much as 10%, according to the Women's Institute for Financial Education, or WIFE.
"I always just thought everything was OK, but obviously it wasn't,'' Greene says. "I never saw any clue that there was any trouble or that there was that much credit card debt."
Tell us: Are you staying married for financial reasons?
In retrospect, Greene knows she made a mistake by relinquishing all control of the family finances.
Now, she needs to regain control of her finances and create a plan to improve her financial security. Here are six steps she should take:
1. Get a job, or several. Greene will receive $39,000 a year in alimony and child support for three years, but that won't be enough to cover her bills, much less give her anything extra to pay down her debt. She says there's no job that's beneath her, and that's the right attitude. It's time for her to step up and get her hands dirty. If she needs several part-time jobs, so be it. The more she can earn, the faster she can get rid of her debt and move forward.
2. Create a spending plan. Greene will have to account for every penny she spends. That idea is new to her.
"I have never been a good budgeter,'' she says. "I've been a very good spender."
'There is no money tree'
Spending for anything that's not essential should go on a long hiatus. No more manicures (she should do it herself) or hair appointments (try Clairol) or dining out. Shopping should be limited to necessities.
3. Re-evaluate the big expenses. Greene will rent a much smaller home in the same town for $2,000 a month. Utilities and other items will be additional expenses. It will be much cheaper than her previous "McMansion," but it's still far out of Greene's budget. Unless she starts bringing in a lot of income, her cash crunch will continue. Therefore, she should look for cheaper housing, even if it means moving to a less expensive town.
4. Call the credit card companies. All that debt is still racking up lots of interest. The late and missed payments of the past guarantee these accounts are being charged the highest possible interest, and that means the balances are growing. Greene should call each company and explain the situation, offering to pay a set amount each month. Then she should ask each company to lower or freeze her interest rate.
5. Keep an eye on her credit. Greene needs to remove her name from any credit card or other debt that's associated with her ex-husband. If he starts spending again on a credit card that shares her name, she could be responsible for the charges. Greene should get a copy of her credit report and make sure she's considering all her debts. (See "How to get a credit report for free.")
6. Involve the kids. Greene's children -- 15, 14 and 9 -- are old enough to understand the importance of money management.
"We live in a town where most don't want for much,'' she says. "It's going to be different, but I also think it's an opportunity for them to become a bit more grounded and realize (the money) is not just there."
Greene can make this experience a lesson for her kids. For example, if her kids want designer jeans or hip new sneakers, she can teach them to work for the items they want. Whether by baby-sitting, dog walking or cleaning up a neighbor's yard, they can earn money to pay for their wants.
The future
Greene is taking on this latest challenge with a positive attitude, and that's an important step to success.
She knows the first few years will be tough, but she's happy to once again have control of her finances -- and plans to keep it that way in the future.
"I'm having a few trust issues,'' Greene says. "I don't think I'll be giving the reins over to anybody anytime soon."
Producer's note: Do you have a financial emergency that you’d like help with? If so, e-mail your story to MSN Money’s Karin Mueller at money911help@hotmail.com.
Published Jan. 16, 2009
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