A few years ago, when I was moving from Florida to Maryland with my husband, while pregnant, AND switching jobs, I had a friend give me some great advice. “Take it one box at a time,” she told me. “But there is so much to do!!” I responded, exasperated at the growing To Do List I was attempting to keep in the Notes section of my phone. She smiled and said, “Yes. But not everything needs to be done at once. So, spread it out. Pack your home by committing to do one box at a time, one day at a time, leaving the necessities like toiletries and utensils for last. Then, when you get to the new house, do the same thing. Unpack the necessities first, and then commit to one box, one day at a time.”
I must admit: I thought this was a strange and unrealistic suggestion, but I went against my judgement and did as she suggested. I cannot tell you how glad I was that I did. Moving is a huge disrupter in your life, and with life disruptions comes a multitude of emotions and stress, which can make you feel like your world is crashing down around you.
Your mind creates these false deadlines, expectations and worries, filling you with dread and piling a mountain of stress on you. Unpacking one box at a time allowed me to prioritize my emotional health, and sidestep false deadlines I would have created for myself if I had an unrealistic expectation of my house being perfectly in order the moment I arrived. There were things far more important and timely for me to stress about than being fully unpacked right away.
Now, as a financial professional, I have realized that this mantra of “One Box at a Time” is how I approach helping clients who are experiencing one of the largest life disrupters there is: Divorce. It should surprise no one that divorce is an emotionally trying and stressful time. The great news, however, is that there is one aspect of divorce that can be unpacked in a manageable way with the help of the right professional: Your finances.
You may be surprised to find out that your financial advisor is an important part of your team when considering/exploring/finalizing a divorce. I would argue that, in my experience as a professional, they are. Sometimes I see individuals even before they go to get an attorney. The most common question I get is, “Can I even afford to be divorced? Before I head down this road, I want to be sure I can financially afford the split, and then afford to be on my own.” Finances are an important consideration in taking this step.
(Edited to add: This isn’t to say that you shouldn’t go forward with it if financially it seems difficult. I’ve taken on more than one pro-bono case where my client is a victim of domestic violence, so in cases like that, the important thing is to focus on moving on and to work THROUGH your finances to be in the best place possible as you start your new chapter. Staying married to a spouse for monetary purposes is never a good idea.)
I help clients unpack the box that is their financial life. In doing so, I help them prioritize financial activities, have realistic expectations, make important decisions, sidestep false deadlines they may otherwise create for themselves, and I provide expert testimony for their attorney should they need it. Divorce isn’t an overnight transition, and it is very emotional. The great news about the “Financial Box” is that it’s fact-based, and can be appropriately prioritized so you can focus on other items with your attorney and other advisors, like custody of minor children and your emotional health.
If you are going through a divorce, or contemplating taking steps toward exploring it, here are the ways in which a financial advisor can help you, and your attorney, throughout your divorce process:
- Unpacking the box that is your financial life: Consider how hard it is to make decisions without having all the information or understanding all the information. A financial advisor can ensure you have the information you need to make decisions with your attorney. Every marriage is different. For some, one spouse handles all the finances and the other doesn’t get very involved, which is perfectly normal and fine – until you decide to go separate ways, of course. You may need a financial professional to help you understand what your investments look like, or your insurance and/or your debt. There is a long list of things for you to look through before signing that final agreement. For example, if your ex has a pension and they are asking you to waive your interest in it, you may want to have a financial professional evaluate just exactly what means. You never want to look back and wonder: “If I had known X, maybe I would have made a different decision.” The big message here is that you want to have as much information as possible so that you can make decisions from a foundation of knowledge and confidence. Knowing the facts takes the fear away that would otherwise be present if you left it unknown.
- How much does it cost to be you now? How much does it cost to be you in the new chapter? It’s a very helpful exercise to do what is called Cash Flow Planning AKA budgeting. It helps you understand how you spend money, how much you can save, and what it will look like once you are no longer married. Sometimes people worry that they may not be able to afford their life as a single person, but how can you know this for sure until you evaluate it? A lot of times, Cash Flow Planning helps you put your mind at ease to help you understand your budget moving forward. It can also help you make decisions like housing and career choices.
- Asset review: All assets are not created equal, and it’s important to take a good look at things and know which assets you want and which you’re comfortable allowing your ex to have. These include houses, investment accounts, retirement accounts, insurances, and even antiques and other personal property.
- Projections related to alimony: Monthly payments vs. lump sum: If your divorce may involve alimony, it’s important to evaluate if it makes more sense to take payments over time or a lump sum payment. Oftentimes, a lump sum payment is better for both parties, but analysis and projections by a professional are required to make this decision because it involves considering things like market return, inflation, and longevity, to name a few.
- What about the house? Can I afford to stay? How much is my equity? If you own a house with your ex, these are common questions on the forefront of your mind. It’s very helpful to have a financial professional help you think through this. Part of the financial analysis revolves around the Cash Flow Planning/Budgeting mentioned previously. The second part, equity in your home, isn’t as straightforward as many people would like because we often must subtract the various costs of sale before coming to a net equity to split between you and your ex.
- Insurance: What needs to change? Your insurance needs as a married person are usually very different than your insurance needs as a single person. Also, as your asset ownership changes, your insurance needs will change. Having a financial professional who doesn’t sell insurance review this for you so you can start to investigate and secure appropriate insurance is important as you move forward in your new chapter.
- Financial Expertise related to in-court testimony: Occasionally, divorce proceedings end in a trial which can benefit from a financial expert providing testimony related to the advocacy of your attorney. For example, if your attorney wants to advocate for a lump sum payment of alimony instead of monthly payments over time, a financial expert may be helpful in displaying why this is the case. Be sure you find an advisor who can serve in this capacity.
At the end of the day, having a financial professional on your team of advisors through your divorce will ultimately reduce your stress, give you all the information you need to make decisions, give your attorney all the information he/she needs to adequately advocate for you, and potentially limit your expenses related to back and forth negotiations.
A divorce is stressful enough without having to worry about trying to be an expert. You’ll be surprised to find out how much you may not know, and you’ll want to ditch any preconceived notions you may have had. It’s important to have competent, compassionate and intelligent advisors in your corner – to get you set off on the best foot in this new important life chapter. In addition to your attorney, these advisors may include a financial advisor, a therapist, a business advisor, and/or even a spiritual advisor, to name a few. Be sure to surround yourself with the best when choosing this team.
And, when all else fails, remember to focus on one box at a time. Your new home doesn’t have to be perfectly in order immediately for you to find peace and solace in the knowledge that you’re headed in the best direction for your future. As sad as a divorce can be, the important thing is that it is pointing you on the best new path for you.
Margo Cook is a fee-only financial advisor, and is honored to serve clients experiencing life-changing transitions like divorce.