Celebrity Divorces in the News
Celebrity divorces grab news headlines, with hundreds of millions of dollars split between individuals that will never experience financial insecurity. But for the vast majority of the population, divorce is not only emotionally challenging, it can also be loaded with fear for your financial future.
And that concern is real. Between splitting the community assets, the legal fees and the costs of creating two households, the decisions that individuals make during this transitional period can be crucial. And yet, they must be made when one is in the worst psychological condition to do so.
In my years of doing the financial analysis for divorcing couples, both as a “neutral” facilitator in various Conflict Resolution modalities such as Solo Mediations, Collaborative divorces and Integrative Mediations, and as an advocate for one of the parties in more traditional Litigation, there is one thing that seems to make a significant difference is turning the corner from indecision based on fear, to being able to negotiate with confidence and move forward with a realistic sense of empowerment. That one thing is having realistic expectations of what the income and expenses will be going forward as a single person.
Let’s first agree to not use the “B” word. No “budget” talk here, and no judgements. Rather, it’s simply a willingness to gather practical, pragmatic information in an organized manner for smarter, more informed and less stressful decision making.
But My Spouse Paid / Pays the Bills
Yes, and it can be scary transitioning to this new role. However, the process of detailing the future expenses and income is the key to moving forward, both actually and psychologically; from being dependent to being independent, from passive to active, from fear to empowerment. Even if your spouse continues to pay some of the bills directly, it’s about psychologically changing from a married person to being single, to taking the reins so to speak.
Which, once again, is often very difficult.
But’s it’s happening. So you either fight it, or embrace it. Embracing it can still hold fear, but also clarity of purpose. And confidence.
So to do this, you must gather up those expenses, with your spouse’s assistance to the extent that it’s available, and doing your own research in areas that it’s not. Use realistic, even conservative (slightly higher) estimations for food, groceries, entertainment, and transportation. Sample expense lists (sometimes labelled “budgets) easily obtained online.
But Everything is Up in the Air / I Don’t Know What the Housing Costs Will Be
Will you be selling the family home? Will you be buying? (And if not with all cash, can you qualify for a new loan?). How much will those mortgage payment, insurance, utilities, and other expenses be? Will you be buying something less expensive, and will there be cash left over to invest to generate some income? Will you rent?
These are hard future scenarios to know. They can seem overwhelming, filled with many emotional variables, including the effect on the children’s schools and friends, and how we choose to hold on to past narratives or move forward with current realities. But to simplify it all, you can just work on understanding the numbers: the price of the replacement home, the down payment and monthly payments. You can fairly easily get average costs for utility bills, insurance, property taxes and maintenance costs, at least to get started. If not buying, then use the average costs for rent. And then list the expected future income sources, even if it’“guestimating”. Spousal and child support and other future income may not yet be known. The numbers will get clearer later as you go through this process. But it’s important that you want to know what they are.
Get Assistance If Need Be
To the extent that you (and perhaps your spouse as well) can do this work, terrific. If additional help is needed, your accountant or financial planner may be able to assist you. Certified Divorce Financial Analysts (CDFA) are specialists in this area that charge hourly. They can model up various cash flow scenarios to show you what the financial future might look like, including buying or renting, spousal and child support payments, income earned through work and from investments. Also, projections can show current cash flow as well as long term objectives, including funding kid’s education and retirement.
Moving Forward With Information
Being able to negotiate in good faith based on knowledge about the future financial picture moves one away from fear, and to a place of addressing the reality. It doesn’t solve difficult financial problems, or family / communication issues. But if does add a level of transparency to a challenging, murky time. A time when important decisions, and level headed negotiations, must be made.