5 Financial Tips for Those Going Through a Divorce
Divorce, no doubt, is devastating emotionally, but can also be devastating financially. Even if there is a lot of money, realizing your standard of living is about to get cut in ½ can be a hard pill to swallow. A pill that many do not want to face…but the longer you wait to understand the reality of the financial situation, the harder it will be. Over the past 10-years or so, we have come to realize there are some basic things that you can do to help alleviate the financial stress of divorce.
1. Sit down with Your Partner, sooner, Rather Than Later
The longer you wait to sit down and talk about the finances and how things will change, the harder it will be to do so. As time goes by and the shock begins to wear off, and the hurt starts to kick in, it will be more difficult to separate your feelings from facts.
2. Choose a Neutral Process, Not a Contentious Process…for Many Reasons
Getting your selves into a contentious process is a bad financial decision for many reasons; (a) a contentious process is far more expensive (like 10 x’s that of mediation), (b) it is a process that takes the decision-making power away from you and your partner; and (c) it instigates fear and mistrust, which often leads people down a rabbit hole they will never be able to climb back out of.
3. Choose Your Battles
We have all heard this across a variety of issues, but in divorce, it is vitally important to know when to LET GO and move on! Do not spend time (and money) fighting over a couch you can go and rebuy for less than you spend in fees fighting over it. The fight over the irrelevant possession is never about the possession, it is about something else entirely, but one may feel if they don’t get the couch, they have lost everything. Get with someone who can give you objective support and help you to determine when it is time to let go and move on. Nothing is more valuable than your peace of mind and quality of life!
4. Work with Financial Experts.
While we encourage you to let go of your attachments to possessions, we do NOT encourage that you let go of items, or accounts, that you are unaware of their true value. For example, if you want to waive your interest in your spouse’s pension, you have the right to do so, however, make sure you understand how much you are actually entitled to as well as any future benefits you may be giving up (such as a survivor benefit). We are aware the unassuming spouse may have been convinced (perhaps by the other spouse) that there is little value in the pension when there is actually a significant value. In short, make sure whoever you are working with has a financial background, such as a CDFA (certified divorce financial analyst), and if not, find one to work with alongside whatever process you are in.
5. Pay Attention to Rules in Mortgage and Lending Industry Early on in the Process
If there is a chance one of you will want to purchase a home in the near future, make sure you ask your mediator to connect you with a lender who can explain the lending requirements that will need to be part of your overall agreement and figure out the set deadlines/required number of monthly payments, as soon as you can, to make sure you begin complying as early on as you can.
**BONUS TIP: In case you are not familiar with the new tax laws, while spousal support is currently deductible by the person paying and taxable to the one receiving the payment, as of Jan 1, 2019, this will not be the case. Spousal support payments will be made based on net income. This may or may not have significant ramifications in your case, please make sure to ask your mediator and educate yourself on how your case may be impacted by this change so you can decide if you need to make sure your case is complete before December 31, 2018.
Interested in having a divorce financial professional assist you? Contact San Diego Family Mediation Center today (858) 736-2411 or fill out our form online.