Sep 30, 2024 - 3 Financial Considerations Designed to Improve Your Pre-Divorce Experience
A client today said “I want to be able to stand in a field on my own …” Let’s get there!
A Ramsey Research study of over 1,000 couples[1] found that finances were the #2 reason for divorce, and infidelity was #1. Despite this, we believe women continue to feel uneducated and helpless regarding the financial aspects of divorce. Many may lead with their heart and neglect the financial component of divorce to their family, their friends, or their soon-to-be ex-spouse.
The following 3 implementable strategies may help as you engage in the divorce process.
- Be realistic about your budget and cash flow needs. Think with your head, not your heart.
Our inner Pollyanna and empath want to believe our soon-to-be ex will do what is in our best interests and what is fair. Take a deep breath, be honest with yourself, and answer these 2 critical questions:
What are your monthly expenses? Try tracking your expenses for 2-4 months. You may find your grocery bill is $1,200 a month instead of $500, you overlooked the $300 a month spent on Amazon, and your children’s gaming is running $250 a month.
What is your income, and how or will it change post-divorce? If you are a single parent, will you still be able to travel for work? If you are a stay-at-home parent, will it take time to find a job, and how much do you think you will make? Do you need additional training or licensing? What are your needs vs. wants?
As soon as you have an inkling that your marriage may be going south, even if the “D” word has not been discussed, ensure you are aware of your individual and joint financial accounts and keep copies of current statements—schedule time to discuss next steps with a Financial Professional. Do not lose sight of what marital assets are. Yes, the money contributed to a 401K during the marriage is a marital asset. No one wants acrimony; however, it is imperative that you protect yourself.
- Be mindful of your legal fees and control what you can control.
After your first call to your mom and your second call to your best friend, in many cases, a call to a Family Law Attorney is the third call one makes when embarking on the divorce journey. As if the divorce process was not difficult enough, having astronomical legal bills can be too much of a burden. Asking the following questions before signing a retainer can help provide transparency, identify cost savings, and manage expectations regarding legal fees.
What are your hourly rates? Clarify hourly rates and ask which professional does what work. When there is a Junior Associate or Paralegal available at the firm, you may want to avoid the high-priced Partner doing Lexus/Nexis research and writing template motions. Some firms offer blended rates “upon request.” Ascertaining who will be doing the work or having a blended rate may decrease your legal fees by 30%or more.
How do you charge for e-mails and phone calls? Many law firms track emails and telephone calls and charge .1-.2 hours per email or voicemail received or sent. It is unsettling when you are billed five .2 hours for “correspondence,” “email,” or “voicemail” in a single day; these fees add up fast. Unless urgent, consider holding your questions and sending a consolidated email or leave a comprehensive voicemail at the end of the week.
What is expected of me, and how can I help streamline this process? Set expectations upfront, including your budget. Respond timely and concisely to your attorney. Do as much of the document gathering and organizing for your attorney as possible.
What do you charge for copies? Unfortunately, while Docusign and electronic documents are commonplace, the legal profession continues to be paper-intensive. Printing your documents and delivering them to your attorney’s office can save you some cha-ching!
Vet and retain the right professional team for your situation; having good counsel can be better than having no counsel at all.
- Be conscientious about what you buy with those 401k assets.
As tempting as it may be to spend the windfall of money that may be coming your way, before committing to the newest G-Wagon, be sure to consider tax implications. Reach out to your financial professional. Otherwise, you may be making Uncle Sam’s day!
While these 3 strategies do not scratch the surface of the behemoth mountain of financial pitfalls one can encounter during the divorce journey, they are intended to provide helpful tips. We will regularly sprinkle our posts with actionable ideas intended to help mitigate the angst of divorce – be sure to keep an eye out!
If you have any questions regarding your situation or would like to schedule a complimentary consultation, please get in touch with me at rdecosta@saxwa.com and visit www.saxwa.com to learn more about our team and the resources available that may support you during the divorce process.
Disclosure
The content is for information purposes only and developed from sources believed to be providing accurate information. We make no representations as to its accuracy or completeness. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Opinions expressed herein are solely those of the individual and may not be representative of SAX Wealth Advisors. Advisory services are offered by SAX Wealth Advisors, an SEC[2] Registered Investment Advisor.
[1] https://www.ramseysolutions.com/company/newsroom/releases/money-ruining-marriages-in-america#:~:text=According%20to%20a%20new%20survey,and%20anxiety%20surrounding%20household%20finances.
[2] Registration does not imply a level of skill or expertise