Divorce and Financial Planning

Divorce and Financial Planning

April 17, 2020

Let's be real, very real for a moment. 

Divorce is hard. 

Whether you initiated your divorce or your partner asked you for the dissolution of your marriage, life before and life after divorce often looks very different.

  •      Two income household...to one income household, it can feel as though the world is on your shoulders to provide.
  •      Two parties saving toward retirement...to retirement now being entirely dependent on your savings and the contributions, if any, from your employer.
    •      Managing a household with two adults...now you're responsible for all of the parenting, cooking, cleaning, grocery shopping, helping with homework, keeping the bills paid, everything else under your roof.
  •      What's mine is yours and what's yours is mine...to the introduction of potential alimony and child support payments.

Life has changed and not always for the better.  I have to believe that no one gets married to get divorced, but divorce has been the reality for many couples in today's society.  As someone who has been through the process herself, I can identify with the fact that divorce is emotionally taxing.  Planning for your financial future will also be radically adjusted.  

As a Financial Advisor, I work with many divorcees and understand on a personal level what you may be dealing with emotionally and financially.  Here is my advice for anyone starting a divorce, working through the process or recently through the divorce finalization process...

1. Build a budget, a new budget based only on your income and your expenses.  Adjust for any alimony and/or child support.

2. Evaluate your retirement funding.  Whether your retirement was left untouched or you gained or lost retirement savings in the divorce process, the adequacy of your retirement savings may now look significantly different than what you expect.

3. Pull a credit report.  Make sure that any joint financial obligations have been resolved.  The credit report will show you joint liability obligations that may need resolution.  Also, consider joint bank accounts, investment accounts and accounts held for any mutual children.

4. Evaluate your life insurance needs.  You might be thinking, why?  It's just me now, or it's "just" the kids and I.  Exactly.  Your life is about to or has changed, thus, so have your needs.  As a mother of three boys, I feel that I have an obligation to care for my children if I am not physically walking the Earth anymore.  I may not feel any obligation to take care of my ex-spouse (unless required by your divorce decree to compensate for the risk of lost alimony/child support), but I need to evaluate what my current life insurance will do for my family.  

5. Review your beneficiaries.  Sounds like a no brainer, right?  I cannot tell you the number of times that I've been moving accounts for clients and discovered that his/her ex-spouse was still the beneficiary on investment accounts or life insurance.  When you are going through a divorce, sometimes it can be difficult to see the forest for the trees.  When you're working through iteration after iteration of settlement agreements or requesting and receiving interrogatories, beneficiaries are not always top of mind.  PLEASE be sure to work with your attorney before changing any account titling, investment allocations or beneficiaries.  Your attorney should be giving you legal advice to keep you within the guidelines.

6. Work with an Advisor.  Having an objective party to help you re-evaluate your current situation, develop actionable steps and hold you accountable can be a great way to get your feet back under you after a divorce.  

Give me a call, I'll help you understand your current situation.  I'll help you evaluate assets vs cash flow during the divorce process.  I'll help you find your new normal financially.  

 


This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with your financial professionals regarding your personal situation prior to making any financial related decisions.  Waddell & Reed does not offer tax or legal advice.  (04/20)