Getting a divorce? Here’s how to tackle those money issues

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When dealing with a divorce, it can be difficult for you to focus on your finances in the future. However, it is important to face them sooner rather than later.

“People often say ‘I just want to get out,’ but reality affects you later on,” says certified financial planner Niv Persaud, CEO and divorce financial analyst. certified by Transition Planning and Guidance in Atlanta, said.

Persaud found that lower-income spouses often don’t know – and are surprised by – the true cost of living. For example, if they want to keep their home, they often forgo expenses like lawn care, roof replacement, and property taxes.

Persaud has developed a 10-point list to help clients become aware of what she calls “lifestyle costs”. (See list below.)

Set aside items for analysis before divorce negotiations

  1. House: Mortgages, property taxes, home insurance, lawn maintenance, utilities, furniture, renovations, etc.
  2. Transport: car payments, insurance, maintenance, recreational vehicles, parking, public transportation, Uber/Lyft, etc.
  3. Dish: dining out, groceries, meal prep services, food delivery, etc.
  4. Personal care: grooming, cosmetics, dry cleaning, shopping, etc.
  5. Entertainment: travel, social club, streaming, concert, etc
  6. Dependent care: children, pets, elderly parents/relatives, etc.
  7. Health: medical, dental, vision, hearing, gym memberships, exercise streaming, etc.
  8. Gifts: donation, holiday, birthday, wedding, etc.
  9. Other terms: other expenses that do not match other items
  10. Save: future spending

Source: Niv Persaud, CFP, CDFA, Transition Planning & Guidance

Another big misunderstanding is that people think they’ll get spousal support for the rest of their lives, but that’s not how the legal system works, Persaud says.

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What’s more, she says, “every state and every county has different laws and is very dependent on the judge, so it’s important to use an attorney from your county.”

The average person also doesn’t understand that not all wealth is created equal, said CFP Kristina Caragiulo, a certified divorced financial analyst and wealth manager with BDF in Chicago.

“Example: $10,000 in one [individual retirement account] or brokerage accounts are not the same as $10,000 in cash due to their various tax implications,” she said. IRAs and brokerage accounts can trigger taxable profits. “

The role of a financial advisor

“Financial advisors need to be involved throughout the divorce process because there are so many financial decisions that can affect the rest of the family. [clients’] life,” said Caragiulo. It’s the only time in your life that you can see the impact of a decision before you make it. “

Among other things, advisors may look at allocations within a brokerage account’s asset classes to develop assumptions about rates of return, she added. “In turn, they can offer different scenarios and probability of success in covering your post-divorce expenses.”

CFP and certified divorce financial analyst Claudia Mott, owner of Epona Financial Solutions in Basking Ridge, New Jersey, says there’s a lot of change to work out.

More words Change a life:

Here are other stories that give a financial perspective on major life milestones.

“I call it the ‘Year of Fear,'” she said. Mott listed several important ways that financial advisors help divorced spouses deal with financial problems, including:

  • Education: Mott often answers basic questions about homeownership, the components of a mortgage, and how insurance works.
  • Account consolidation: Advisors handle post-divorce remittance documentation and set up accounts properly (e.g., retired versus non-retired).
  • Planning and Investing Before and After Divorce: They work to meet your immediate and long-term goals.
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Financial advisors may also be referred to as consultants for divorce proceedings. CFP and certified divorce financial analyst Michael Black, owner of Michael Phillips Black Wealth Management in Scottsdale, Arizona, provides financial analysis for attorneys to present in court for judges to make decisions. determined.

Black describes himself as a “litigationist [certified divorce financial analyst] who explains the financial implications for different situations and different marital interests. “His opinion is necessary, he said, because” lawyers who are applying the law are not trained to develop and present a case before a judge with a view of what that means. What is financial for the customer. “

“Their job is to present a case that meets the requirements of local laws and customs,” Black said. “They don’t focus on the most profitable financial outcome for the client because that’s not their training, responsibility, or interest.”

Therefore, Black performs financial modeling for attorneys and courts to determine a client’s post-divorce financial needs and establish a financial pathway. The hardest part, he says, is knowing which properties best meet the needs of the client.

“If they’re not working with a financial advisor, clients often have to advise their attorney about which properties meet their needs,” Black said. “But often, customers don’t plan ahead for what they need; instead, they react to what they get.”

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