Over the years, payday loans have gained a bad reputation. This is partly because of statistics published by organizations like the Center for Responsible Lending , who, in 2022, reported that the typical payday loan borrowers pay $793 in fees on a $325 loan. At costs that high, consumers need to stay away from payday loans. But, the loans don't have to cost that much.

What Are Payday Loans?
A payday loan, also known as a cash advance or check advance, is a small, short-term loan that's usually repaid by your next payday. To be approved for a payday loan, all you need is identification, proof of income, and a checking account. The typical fee is $15 for every $100 you borrow. You write a post-dated check for the amount of the loan plus the fee and the lender cashes the check on your payday.

If you can't afford to repay the loan by your payday, you can extend or "roll over" the loan. You'll pay the fee and your due date will be extended to your next payday. The more you roll over a loan, the higher the cost would be. That's how a $325 loan could end up costing $793 in fees. Many states limit the number of times a payday loan can be rolled over so a single loan won't always cost that much.

Advantages of Payday Loans
Despite the potentially high cost of payday loans, there are some advantages to using them.

For starters, there's no credit check. Approval is quick and easy. If you need money in a hurry and don't have the credit rating to get approved for a bank loan, a payday loan could be a viable alternative.

A payday loan could save you from worse consequences like credit card late fees and non-sufficient funds fees. A credit card late fee might be as much as $39 and a non-sufficient funds fee might be $37 or more if you end up with multiple bounced transactions. If you borrow a payday loan of $200 with a $30 fee and pay it back by the due date, you'll save as little as $7.

Drawbacks to Payday Loan Borrowing
The drawback of payday loans are more publicized than the advantages. The one that's most mentioned is the high annual percentage rate. Payday loans in Missouri can get expensive if you repeatedly roll them over or borrow new ones. The fees continue to add up costing you more than the alternatives.

If you don't have the money in your bank account when the lender drafts your account, you'll face insufficient funds charges from the lender and your bank. On top of that you still have to pay the payday loan fee.

Payday loans are typically quick fixes to deeper financial issues. It can be like putting a band-aid over a wound that needs stitches. If you're living paycheck to paycheck, the slightest emergency will set your finances into turmoil. Chances are, if you can't afford the emergency today, you won't be able to repay the loan in two weeks. The easy borrowing might keep you from examining your finances and fixing the real problems.

The romance began as a couch-jumping, motorcycle-riding, Scientology-laced, PDA-heavy courtship. It’s been fascinating at every step, yet bizarre by even Tinseltown’s standards. But the final chapter of power couple Tom Cruise and Katie Holmes could prove to have as many twists and turns as one of his blockbuster thrillers.

The myths and facts surrounding the divorce evolve daily. One media source will claim Katie Holmes could get $3 million for every year of marriage while others say she won’t get a dime. Between property settlements, alimony and the biggest sticking point, custody of daughter Suri, the path to a final divorce outcome will be paved with plenty of cash.

This star-studded microcosm of divorce highlights what a majority of divorce-bound couples may experience: a shock to the bank account. Forbes estimates that the cost of divorce averages from $15,000 to $30,000 per couple, making matrimonial law a multi-billion dollar business.

Mel Gibson’s 2022 divorce from his wife Robyn of 30 years also demonstrates how wedded un-bliss means big bucks. Gibson’s divorce might be the most expensive Hollywood divorce. His ex walked away with $425 million, or half of his fortune, along with the residual income from his past and future films. While Mel certainly isn’t hurting for cash, you could argue that his bank account has slimmed down to an amount he’s likely not accustomed to.

Whether you’re superstars like Tom and Katie, or the average Joe and Sally from Anytown, USA, there are steps you can take to absorb some of divorce’s financial impact.

The Legal Costs of Lawyering Up

Tom Cruise’s camp reports that he was “blindsided” by the divorce filing while filming on-location in Iceland. Meanwhile, Katie Holmes reportedly moved into new digs, fired the security team Tom created for her, and made a move for sole custody. She’s clearly mapping out her exit strategy, but it’ll hardly be a clean break when they lawyer up.

The complexity of a divorce has a huge effect on the out-of-pocket costs. The more that you can agree on outside of the courtroom, the less the both of you will spend on lawyers and legal fees.

Lawyers and accountants can cost hundreds of dollars per hour for each divorce stage they’re involved in. If they’re required to prepare pleas, financial statements, file motions and conduct examinations, it requires extensive man hours.

If you can’t avoid divorce drama with your soon-to-be-ex, you can still minimize the fiscal drama. Before you even call a lawyer, do as much legwork as you can. This means gathering all of the necessary information involved in your paper trails, like tax documentation, credit card statements and account activity.

Your legal team will need this information anyway, so if you can reduce the time it takes to sort through it, they will have fewer hours to charge you for. In any case, clarify with your lawyer what counts as “on the clock.” And it may be tempting to vent to your lawyer about your spouse, but stick to the facts of the case. If you’re on the clock, you’ll end up paying the price for your lawyer to double as your therapist.

One option to avoid these legal expenses is for couples to use mediation. A professional trained in conflict resolution enables discussion between the parties and tries to find common ground with money and custodial arrangements.

A mediator may not be less expensive by the hour than a lawyer, but they take up less of your time. Some mediators may charge a flat fee instead of hourly, which can work out in your favor. Either way, when you can come to agreements on certain legal issues, you minimize the cost of heading to court.

Assets and Protecting What You Have

Tom and Katie’s portfolio of assets is lustrous to say the least. They boast homes in Beverly Hills, Montecito, New York and Colorado. Forbes estimates Cruise’s net worth at $75 million. But like any divorce case, assets will boil down to marital and separate property.

Separate property includes everything you owned before the marriage. If you received inheritances or gifts before and after the marriage, your spouse can’t claim them. Any judgment payments awarded to just one spouse are also considered separate property.

Marital property operates differently. These incomes and assets acquired during the marriage are divvied up depending on a number of factors:

• The length of the marriage
• The potential financial standing of each spouse after the divorce
• The standard of living brought into the marriage
• How the assets can be divided to maintain the lifestyle of the children involved

For nine states, divorce entails a 50/50 split of assets, known as community property.

No matter how the asset chips may fall in your state, you may also have to share the burden of lingering debt acquired during the marriage. As a result, it’s crucial to proactively shield yourself from as much debt as you can.

The element of surprise in a divorce can put you at a disadvantage. But if you’re planning it or anticipating it, a few steps can sustain you financially in the months to come:

• Consider a separate bank account or credit card so that you can for living costs and legal fees without any drama from your spouse.
• On the other hand, cancel as many joint accounts as you can to curb continuing debts from adding up and pay off the debts on those accounts. Give your spouse enough warning so that they can find other means to support themselves but not enough time to rack up charges.
• Check your credit report so that you have a heads up on any outstanding debts or liabilities in your name, as well as how your spouse has affected your rating.

Child Support and Alimony

Perhaps the biggest question mark in the Tom and Katie divorce saga is where it’ll leave their daughter Suri. Custody aside, the bills between potential child support and alimony are enough to alter one’s finances, Hollywood star or not.

Child support payments are decided by the court based on the custody agreement. It’s calculated based on the gross income of the parents and excludes the salaries of any new spouses. These payments can be garnished directly from your wages and are about as non-negotiable as they get. If you neglect to make these payments—even with a lack of employment—you can face repercussions as serious as jail time.

Because of these contingencies, it’s essential that you establish proper budgeting if these payments aren’t already taken out of your paycheck. Not only will you be helping to secure the financial future of your child, but it’ll help maintain a realistic view of your post-divorce bank account.

Alimony is another post-divorce budget buster. At its basic level, alimony requires the spouse who earns significantly more to pay the other on a monthly basis. Fortunately, alimony is not necessarily permanent. Based on a judge’s ruling, you may only be responsible for alimony until:

• Your ex remarries.
• Your kids grow up.
• A judge places an expiration date on the payments.
• Your ex passes away.
• Your ex makes no effort to partially support themselves.

To dodge the financial bullet of alimony, consider settling with your ex for a lump sum, which may cost you less money and aggravation over the long term. Conversely, you can’t rely on alimony as your financial life raft because it’s not a permanent guarantee. You may achieve a better settlement if you’re willing to apply for jobs but still make less.

Remain Lovers Instead of Fighters

Avoid the fight-or-flight response that’s so natural in the emotional turmoil of divorce, and bound to impact Tom and Katie’s situation. Otherwise the filing process is a lot like a boa constrictor. The more you fight against it, the harder it’ll squeeze your bank account. By making the best financial decisions from a bad situation, it may be easier to move forward.

Congratulations to the 2012 Ranly Award Winners!