The process of divorce brings out a full range of emotions, from shock and anger to fear and uncertainty. The legal proceedings, compromises and settlements to be made can lead to a lack of confidence and vision for the future. Once the decree is finalized, one may not know what to do next, or who to turn to for financial help. He or she oftentimes doesn’t know where to begin or what is of highest priority.
I experienced firsthand my parents begin new emotional and financial chapters by themselves, without help or guidance, when they divorced. This experience led me to my career as a financial advisor, focused on helping women get their financial lives back in order after divorce. The good news is, there is light at the end of this tunnel, and there is help out there for you. Here are the steps we can go through to get your finances back on track.
- Start right where you are. Regardless of how good or bad your financial situation might be (or how good or bad you think it might be), you are where you are – and that’s okay! In many cases, there are immediate needs to consider that have nothing to do with your retirement savings and financial plan. A professional can help you think through your first moves, such as securing new housing, finding employment, paying your bills, and finding child care. The first six to twelve months after a divorce is a stressful time. Cash flow is tight, and emotions are high. I know, because I’ve been through it personally and with many clients. I’m here to listen and help you with matters whether they’re related to your finances or not.
- Review the divorce decree. Once the decree is finalized, we’ll sit down with the client to review the agreement in its entirety. We’ll make note of how various settlements are to be paid out, and account for all of the items included in the decree. In many cases, clients overlook or forget about certain assets or properties they may be owed – either today or at some point in the future. We pride ourselves on making sure everything is included in the client’s financial picture.
- Make an inventory. We compile a comprehensive document which is an overall view of every asset and liability. This includes things like alimony, child support, the portion of the spouse’s retirement plan that’s owed, insurance, property, and more. We then consider how all of these pieces will be taxed. Creating this inventory helps the client to see the full picture which begins to take the stress of the unknown away.
- Create a plan. Even if you had a financial plan in your marriage, approach this process as if you’ve never had a financial plan before. We begin this process by looking at the current financial picture like this: “Where am I today? Where do I want to be? How do I get there?” Generally, this always begins by ensuring there are enough “emergency” funds available for unanticipated expenses.It’s only once those short-term needs are met that we can begin thinking about saving for retirement. In many cases, I’ll first create a scenario for the client that calculates where they’ll be in retirement if they save nothing. They quickly realize this scenario is unrealistic, and changes need to be made so that their future in retirement is what they want. The plan shows the client their destination, as well as a road map for how they’ll get there. They know what to do, and why they’re doing it. At this point, there is no unknown, no fear, and no uncertainty about doing the right thing.
- Other financial planning variables. Often times clients experience changes with regard to health insurance coverage, life insurance planning, child care, ensuring beneficiaries on accounts are changed, and updating your Estate Plan documents … and the list goes on. Because I work with many clients who are newly divorced, or going through a divorce, I’ve experienced many situations and help them anticipate things they may not have previously considered.
While this level of planning and thought process may seem daunting, it results in relieving a great deal of stress and fear. Ironically, many clients find that once they dig into this process and have a plan, they’re actually better off than they thought. I’ve found that so many people are afraid to ask for help, either because they’re embarrassed about their situation, or they’re being hard on themselves for not doing more. Furthermore, many women I work with were formerly in marriages where their husbands took care of the finances, making them fear their lack of knowledge and being taken advantage of. I focus on providing that education, helping them to realize they don’t have to be afraid or ashamed, and that there is a future they can work towards. It all starts right where they are.