Are you worried about how to talk to your future partner about your debt, from student loans to credit cards? While the conversation may be difficult, it is important that couples have honest conversations about where you both stand financially. I was recently featured in an article on NerdWallet asking how couples can work to “lay it all out on the table” and provide a strong financial foundation for marriage.
Divorce is often a gut-wrenching process. It is also one of, if not the, most important decision you’ll ever make. The average divorce today takes about a year, sometimes longer, to resolve and it can also cost as much or more than what you spent on your wedding (in today’s dollars). Divorce also has the potential to be financially crippling, now and perhaps even more so in the future.
According to the Journal of Financial Planning, female caregivers are estimated to lose, on average, $324,000 in lost wages, social security benefits and pension. Unfortunately, after divorce, many women find themselves in a much lower financial position than their ex-spouses. Not only is this due to the caregiving roles many women have, it can also stem from a lack of clear understanding of the marriage’s total financial situation, such as the long-term investments the family holds, the family’s tax picture and actual family income. It would be difficult for any woman to make sound decisions, especially when faced with a divorce, if she is not aware of the complete financial picture.
Step 1: Understand Your Household Finances
One of the smartest things any woman can do is understand the family’s financial well being as soon as possible, no matter her situation. To get started, seek to understand what the assets are (stocks, property, retirement), what the actual family income is, and what are the family’s expenses. If thinking of a divorce, what maintenance (alimony) and/or child support would be needed to maintain your standard of living and cover your children’s needs?
Step 2: Understand the Financial Implications
Even if divorce is just a whisper in your head, a clear way to help you make an educated financial decision is to engage the services of a Certified Divorce Financial Analyst (CDFA). A CDFA will help you review the family finances and guide the conversation to help you understand the short-term and long-term financial implications of the decisions you will need to make.
Remember…divorce is a negotiation. Amazon didn’t buy Whole Foods without understanding their market share, profitability, and liabilities. Kodak and Xerox didn’t spin off parts of their businesses without taking into account how that was going to impact their future bottom lines. Divorce is essentially the same thing. What you need to ask yourself is what is the level of maintenance can you realistically accept/offer and what does that mean to your cash flow? How do you split the family assets to be equitable and what are the long-term ramifications of those decisions?
Step 3: Seek a Professional Divorce Team
Attorneys have their place during your divorce as they counsel you through the legal aspects. However, most people don’t realize that the majority of attorneys and judges do not have a strong financial background (few law schools require any financial classes in their curriculum). This makes picking the right attorney for your particular situation critical. A strong attorney will incorporate the work of a financial professional into the process.
Getting divorced is hard enough, working with a team of divorce professionals can ultimately reduce the cost of the divorce and reduce the time it can take to make that divorce happen. Most importantly, before making any decisions in terms of divorce be as prepared as you can…financially, emotionally and legally. I often suggest that women check out a local divorce advice workshop like Second Saturday.
Even if you are not thinking about divorce, understanding and staying on top of your family’s finances can help you navigate whatever surprises come your way.
Kitty Bressington is a CERTIFIED FINANICIAL PLANNER™ and Certified Divorce Financial Analyst®. She is the owner of Linden Financial Consultants, a fiduciary financial advisory firm, and founding member of Foundation for Women’s Financial Education.
Divorces aren’t easy. During this emotional and difficult process, you’ll face some of the biggest financial decisions of your life. NerdWallet.com invited me to contribute to this article that highlights 3 of the major areas where you’ll need to make especially clearheaded decisions to ensure your economic well-being
Financial debt shouldn’t keep you from getting married to your soulmate, but before you make your vows there are certain precautions you should take to ensure debt doesn’t hurt your marriage in the long run. I recently had the pleasure of contributing to an article on NerdWallet.com that discusses the steps you and your partner can take to manage your debt, including a few realistic life adjustments that can get you started.
With the New Year, almost without fail, most of us make our resolutions and one of them probably has something to do with money. A common resolution is to “save more for retirement” that often, as weeks or months go by, turns into “I’ll set aside a few dollars after I do this or pay that….” Let’s turn that on its head and suggest that you spend this year getting a handle on how you are spending money.
Even with the economy rebounding, more Americans are stressed out about money than ever before and many women carry the weight of that burden. This financial stress is actually hurting us, both emotionally and physically. Financial stress is directly linked to high blood pressure, ulcers, headaches and depression not to mention it’s the second leading cause of divorce in our country. How about we take a different tack to that New Year’s Resolution and spend the year figuring out why we’re stressed?
For many people, one of the roots of this stress is simply not knowing where their money is going. Understanding where we are spending our dollars is the first step to understanding why we are spending those dollars. Are you eating out too often simply because you aren’t sure what to cook, or perhaps, as a newly single woman, you aren’t thrilled about going home to an empty house so you delay the inevitable by eating out.
Just like a personal trainer can help you get in shape physically, a financial coach can help you get fit with your money. They can help you understand your financial issues and habits and guide change in your behavior with your money. There are many great financial coaches but be sure to look for one that has had rigorous and comprehensive training.
This year, make your New Year’s resolution to understand how you spend your money so all your future years can be less stressful and more savings focused.
For women, there are always those “things” you say you are going to do but life gets busy, work gets busy, one commitment or another invades your carefully structured day and those “things” get submerged under a sea of others on your To Do list. Sometimes though, something happens and you decide “yup, that’s just the kick in the pants I needed.” Well, it’s here and it’s time. I long ago acknowledged that I can’t change the world as a whole but I could do my best to make a change in my part of the world. Sallie Krawcheck, CEO of Ellevest, wrote a great checklist of how women can use their financial power to make small changes and I feel somewhat obligated to share some of it. I’m not asking you to do anything other than think about our predicament and decide if you are comfortable with the state of things not just for yourself but for your daughters, granddaughters, nieces, and best friends. If you are okay with them, then I stand ready to respect your opinion (because that’s what America is supposed to be about). If, perhaps, you are not complacent with recent events, and their subsequent potential impacts, then here’s a couple of things from Sally’s list to think about (I admit with a little editorializing on my part!). However, if we can just pick one as a start, we can make a change because women are the majority and we have the power to change things.
- Mentor or sponsor other women, young or old.
- Donate to a female candidate whose views line up with yours in the next election. Encourage other women to run for office or take a leap and run yourself. It doesn’t have to be President…your local town government impacts your world as well.
- Buy from companies that promote women (check out BuyUp Index for suggestions).
- Invest in companies that promote women. Help fund another woman’s business, perhaps a friend who has been thinking about starting her own business. Talk to your advisor about investment options. Perhaps, even, it’s time to switch advisors to someone who understands your concerns.
- Think hard about not joining or quitting a company that has no successful senior females.
- Talk to your kids about what’s going on. Help them make smart choices for their future as well as our own. Keep the conversation going by following up with them frequently because if we have had trouble seeing it for ourselves perhaps they will need need some reinforcement as well.
And I add one more to list, one that I feel is most important.
We vote every day, with every dollar we spend. Women make the majority of family spending decisions (over 80% of those decisions). It’s time we start voting with our dollars, every day, with every decision. Perhaps that’s not the easiest thing to do but doing the easy thing is what got us here. When it doesn’t work, it’s time to think about a change.
To view Sally Krawcheck’s full article visit: What Trump Could Mean for Women in Business.
‘Til Next Month,
CERTIFIED FINANCIAL PLANNER™, Certified Divorce Financial Analyst®
When it comes to money, discussions with your partner can be downright uncomfortable. Still, when it comes to your spouse, it is imperative to be able to have open dialog and communication. NPR asked for my input in their article discussing navigating the financial landscape of marriage, including a few tips from me on how to set some basic ground rules for you and your spouse to follow.
Just as our life and circumstances change with time, so should our legal documents. I often tell the story of my parents’ wills, which, at a point well into my adulthood, didn’t even mention my brother. It certainly wasn’t anything malicious on my parents’ part, but updating their will was just one of those things that never quite rose to the top of the “to do” pile as they worked, raised two kids, saved for retirement, maintained a home, took care of their parents, etc. Of course, being the generous, kind, benevolent sister that I am, I would never cut off my brother without a cent but not all families are like that. Even families with the best intentions can do strange things in the face of grief and mourning. By updating your will, you have the sole discretion over how your belongings, assets and estate should be distributed, which can help your family avoid any unnecessary turmoil.
This month, take a moment to dig out your will and see if it needs updating. Our lives change…there are births (kids and grandkids), marriages (first, second, third), divorces (first, second, third), and deaths (in every generation). There are also things we overlook. Perhaps you have a loved one who is in a nursing home on Medicaid or a child with emotional challenges living on assistance. Leaving a bequest in your will could be problematic. Also, did you know that the person you designate to raise your kids doesn’t have to be the person in charge of the money you left for them? Your appointed guardian may be great with kids but lousy with money so why risk your children’s financial future.
While you are at it, how about putting together an outline of your last instructions? Families often have a hard enough time dealing with loss. If you put your wishes on paper it can provide a sense a relief to your loved ones and give them some much needed direction during a difficult time. For example, do you want to be buried or cremated? Scattered or interred? A funeral or a traditional Irish wake complete with single malt?
It’s not fun topic to discuss, but we cannot evade death…whether we’ve talked about it or not. And, putting your wishes to paper doesn’t make it happen any sooner. Your will is a necessity that can save your family time, money and grief. Plus, it gives you the peace of mind knowing that your wishes will be clearly followed. Sometimes it is just about knowing how to get started – any good advisor can put you in touch with an estate attorney and will even walk through the process with you.
Hello 2016, Goodbye 2015. I am not normally one who looks backwards and rarely one who talks about the market. However, I am a CFP® so I do have to ask the question…how are things going with your portfolio these days?
With the market acting like a two-year-old throwing a tantrum, are you holding more stocks than you are actually comfortable with? When you first invested, you may have thought yourself a daredevil but, recently, you feeling more like a backyard gardener. Are you getting towards the stage when you are thinking more and more about retirement? Contrary to the commonly held belief, you can’t make up for lost time with a more aggressive portfolio and the last couple of days are proof positive of that. Even if you are in your thirties and the market volatility is driving you nuts, perhaps you shouldn’t have as much exposure because, rest assured, this isn’t the markets last roller coaster ride. The point is, it is important to reassess your risk tolerance and investment objectives at least once a year.
Too often, people pick an initial couple of investments and call it a day – the “once done and forget about it” style of investing. Unfortunately, your money is a little like that goldfish you had as a kid – forgetting about him means Mr. Goldfish is getting flushed down the toilet just like…well, you get the picture. Investments are just like that goldfish, they don’t need much but every once in a while they do need some attention.
Now, while the year is young, why not take a look at how your money is positioned? Give your portfolio some attention and make an appointment with your advisor to review your allocations. Perhaps you have some tax losses you can stock pile for when the market rebounds. However, try to focus more on how your portfolio is balanced and whether or not it matches who you are. That way when the market decides to throw a tantrum in the future, you may not have to worry so much.