Taking the first step when divorce is inevitable
by Jasmina Tadic on Dec 18, 2019
A new year always brings motivation for a fresh start. Maybe for you that means moving forward with divorce. You are probably wondering how to start the process, and how to overcome the anxiety of pulling the trigger. Well I know how you feel! Not because I have ever divorced, but because I too faced making a big financial decision – alone.
I wanted to purchase a home. I saved up for it, reviewed my budget and found the perfect place. But fear still plagued me -- what if something happened and I couldn’t work? Or if I lost my job? Everything was on me and it was intimidating! I know this does not compare to the turmoil of divorce, but I do know that I was focusing on things that could go wrong instead of planning how to make things go right.
Fast forward to today where I am a financial advisor with numerous divorced clients. I find that the younger someone married or the longer they were married, the more concerned they are about the future. For most of their lives, financial decisions were not made alone – especially big ones. And now, not only are they making decisions solo, but they are oftentimes responsible for children. In addition to feeling overwhelmed, they also worry their kids are going to get cheated out of a happy life.
That is why I come to you with this topic in the new year. Assuming divorce is inevitable, the sooner you start the proceedings and determine where you stand, the sooner you can start planning for YOUR future. And the good news is, you don’t have to do it alone!
The first step is to find a financial advisor if you do not have one already. Ask friends or family if they have an advisor that does more than just investment management. Or, search the internet for a local comprehensive financial planner, preferably a Certified Divorce Financial Analyst (CDFA). Even if you do not have much in the way of investable assets, a holistic advisor can help you put your financial goals into perspective.
It is easy to let emotions rule when attempting to maintain current lifestyle when divorcing. Often “for the sake of the children,” you try to keep the house, pay tuition, purchase vehicles – which was easier with two incomes. Most attorneys do not give advice on long-term financial impact of divorce. Their goal is to get you a fair settlement now.
A financial advisor, on the other hand, can show how making lifestyle sacrifices early in divorce can ensure that you won’t be a financial burden on your kids later in life. They will help you determine what your budget and retirement savings plan should look like, and if you can afford to keep the house or if you need to downsize. A good comprehensive planner will tell you what you need to hear, not what you want to hear.
The next step is to determine which type of settlement proceedings best fit your situation. This will primarily depend on the amicability and financial complexities of your circumstances. Contrary to publicized Hollywood divorces, most cases do not necessitate high-powered attorneys and long, expensive court battles. If you trust your spouse to be fair and you both agree to keep things simple, then it can be accomplished quickly and relatively painless.
A mediator is the most cost effective and efficient way to divorce. The mediator will not give you legal advice but rather assist you and your spouse in determining the best way to divide your assets and settle on spousal support, child support and custody.
The collaborative law process is best suited for each spouse having their own representation for resolution without litigation. During this process, each spouse has their own attorney, but all parties are committed to full disclosure of information and reaching a fair agreement without going to court.
If you feel your case involves more complexities, such as valuing a business, or you and spouse disagree on how to approach things, then you may want to turn to arbitrators and private judges. With this approach, each side presents their case with their respective attorney and the arbitrator makes the final decision. Although arbitrators and judges aren’t cheap, they are usually less expensive than going to trial.
Mediators, attorneys and arbitrators know the standard procedure for divorce proceedings, but typically don’t consider your individual long-term goals and objectives when determining an equitable settlement. Seeking the advice of a comprehensive financial advisor before finalizing a divorce can be the difference between a lifetime of stress and trying to make ends meet or a sound financial plan that can carry you into retirement and beyond!