Kitty Bressington, CFP®, CDFA, was featured on the podcast, $even Figures, with Sandy Waters. With more than 20 years of experience, Kitty provides affordable, objective, well-explained financial advice helping clients understand the long-term ramifications of the financial decisions being made, particularly during the course of a separation and/or divorce. Kitty is also founding director of the Foundation for Women’s Financial Education, a non-profit dedicated to improving the financial literacy of women in the Greater Rochester area and local sponsor of the Second Saturdays Divorce workshop—a monthly workshop designed to equip you with unbiased legal, financial, and emotional information you need to make the right decision for your marriage and your life.
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.
We’ve all seen it on TV… A spouse says, “I want a divorce” and suddenly the couple finds themselves in a courtroom duking it out, trying to claim their valuable family possessions. Seems real, right? Oddly enough, less than 2% of divorces are actually settled inside a courtroom. Instead, there are a variety of options available today to “consciously uncouple,” as the saying goes.
First, you have to ask yourselves the big question…“Do you really even WANT to get divorced?” Perhaps what you really need is to talk to a discernment coach to help you determine if you’re just going through a rough patch in your relationship or if this truly is the end of your marriage. A little different from a marriage counselor, a discernment coach can help the two of you work through the decision of proceeding with the divorce or not.
If divorce is the answer, an attorney doesn’t necessarily have to be your next stop. You should consider talking with a Certified Divorce Financial Analyst (CDFA). This is a professional who can help you discuss your assets and financials and shape each person’s expectations for what your financial future looks like post-divorce. The CDFA will give you an idea of what maintenance or alimony may be, how your assets might be split, and what the child support picture might look like. Additionally, and perhaps most importantly, the CDFA can give you an idea of what you can expect to pay for your divorce using the different methods available at this early stage.
At this point, you will have the information you need to take the next step in the process. If you both decide that you can be strong advocates for yourselves, you may consider using a mediator for the negotiations and then an attorney for the actual legal documents. However, if you feel you need more support in the negotiations, you should consider a collaborative divorce. A collaborative divorce is where both parties have an attorney as their back-up support, but the divorce process is handled outside of a courtroom.
If you don’t feel these methods will work for your situation, litigation may be your best option. Just keep in mind the reality of the situation – it’s not like the shows you see on TV. Most people are genuinely surprised by what “going to court” really entails. The time, energy, and relatively quick depletion of assets can not only affect your financial health but your mental health as well. Make sure to explore all of your options so that you can avoid the misinformation and misconceptions about the divorce process.