You don’t generally associate “divorce” with “excellent personal finance education.”
Most children of divorced parents might argue that divorce is a terrible, emotionally unpleasant time—particularly where money is concerned.
While I agree that it can be a miserable time, emotionally and financially, I also credit my parents’ divorce with some of the most important financial lessons of my life, and for making me the financially responsible adult I am today.
The Divorce
I come from a relatively wealthy background—I grew up in a safe, affluent suburb of New York City, where I was raised by two parents with advanced degrees, and went to excellent schools with kids in similar situations. For much of my life, I didn’t have to really worry about shopping for school supplies or getting the clothes I wanted or having money to go to the movies or other incidentals. It was all given to me, just like it was given to my friends.
And then, at the age of 15, my parents got divorced. It was a messy, unpleasant period in our lives, and not worth recounting here (who wants to hear about another suburban kid whose parents fought and eventually separated?).
But as unpleasant as the experience was, I consider it one of the best things that could have happened to me—financially. While my friends were going about their youth unconcerned with material worries, suddenly I had to learn relatively quickly what it meant to have a handle on your money —and your life.
Here are the three key lessons I learned as a result.
Lesson #1: Financial Independence is Everything
Around the time I was 15, my mother made a discovery: My father had been slowly draining our family’s savings, retirement, and checking accounts. By the time my mother realized what was happening, the money was gone. My mom had thought his yearly bonuses would be going toward college for me and my sister, but not only was my dad a big spender, unbeknownst to her, he had also been buying regular tickets to visit his girlfriend in Greece. The money went fast.
Here, I witnessed firsthand one of the most important financial lessons of my life: It is essential as a woman (and for anyone in a relationship, although women are particularly vulnerable) to know where your money is, and to keep an eye on your household finances . You should never rely on someone else to manage everything for you.
Does this mean, now that I’m grown and married myself, that I regard my husband with perpetual skepticism, always under the assumption that he’s about to take the money and run? Not at all. But we both keep an eye on our joint accounts (which makes good sense for a number of reasons, including monitoring identity and credit card theft), and we both discuss how our money is being saved and spent . I also know I will always stay in the workforce, even if and when we have children.
My mother, who had a PhD and a JD, decided to stay home with my sister and me when we were young, then found a job in the Brooklyn District Attorney’s office, which eventually turned into a position as a full-time prosecutor after the divorce. As I watched her realize how difficult it would be to re-enter the workforce, I realized how important it is for women to be able to support themselves financially, regardless of circumstance. Divorce aside, in case of any kind of tragedy (death, unemployment), I want to be able to rely on myself for income.
Lesson #2: Needs Are Expensive
After the divorce, my mother was adamant that we stay in our house and school district. Her desire to make sure we weren’t totally uprooted from our lives, regardless of finances, meant that I soon had to rely on myself for all of those financial incidentals I had always received from my parents.
While my mother was concerned with getting food on the table and paying for medical care (we didn’t have health insurance—we had been on my dad’s plan and he changed jobs, and my mom was looking for work—and I ended up forgoing dentist’s visits for five years), I soon learned what all of those teenage “needs” cost, and how to budget for them.
From gas for my old Honda (a hand-me-down from my grandmother), to movie tickets for nights out with friends, I learned how much money I would need and what I could go without. I picked up more babysitting shifts than I ever had before, took summer jobs at the local Barnes & Noble and as a tutor, and managed (and saved) my own money.
There were days when I hated everything about our situation. One winter day, a pipe burst in our basement, and my mother had no idea what to do, so I called my father and figured out how to fix it. I remember thinking it was ridiculous, but it really taught me how to take control of a situation when I need to. I can fix things around the house; I’m proactive in making things happen; I’m never, ever late on a bill. It wasn’t fun, but it was certainly character-building.
Now, I don’t mind making a dollar stretch (cereal for dinner is a frequent guilty pleasure), and I know how to budget realistically . I also realized that I became more independent than many of my peers at an early age. In college, I used my own money to buy clothes or take trips, while many friends were still fully supported by their parents. Resisting spending on non-essentials early on definitely helped shape my habits as an adult.
Lesson #3: College Isn’t a Given
Even more importantly, what seemed like a tragedy—losing my college savings account—ensured that I knew the value of a college education, and taught me how to find scholarship money and financial aid. My guidance counselor worked with me to find schools that had great financial aid and vouchers so we didn’t have to pay for the SAT or ACT.
I’d always been smart, and a good student, but I definitely kicked myself into high gear after my parents’ divorce.
I’m not sure how much of that was the hyper-competitive academic environment my high school fostered, and how much was the knowledge that I’d have to do very, very well to get into the kinds of schools that would provide excellent financial aid. Either way, I started figuring out that if I wanted something, I would have to go after it, whether that was an after-school job or leadership positions at my school . I stopped being afraid to ask for what I wanted.
I ended up going to Wellesley College, which has great financial aid. During those four years, I was able to go abroad to London, intern in Washington, D.C. one summer, and intern another summer at a literary agency with a $3,000 stipend. That summer at the literary agency, I gave myself $5 for a “fun budget” every week and put any remaining money into a savings account.
Between my jobs during the school year (tutoring, babysitting, and working on campus), a few graduation gifts, and the remainders of my stipends, I graduated with $12,000 of savings—which I used to fully pay off my relatively small college debt . Now, I’m extremely proud to say I’ve saved another $10,000 in an emergency fund. (The secret to this? No fun, ever. I don’t recommend it.)
My family is in a much better place, financially and emotionally, than we were during those years during and after the divorce, and I wouldn’t wish that kind of steep financial learning curve on other teenagers.
But while divorce can seem like the worst thing to happen to a family, what we went through turned me into a more responsible adult than I might otherwise have been, and for that I’m incredibly grateful.
Source: https://www.themuse.com/advice/what-my-parents-divorce-taught-me-about-money
Bypass the destructive effect divorce can have on a family, and move into the new territory of mediation and co-parenting.
“Our conventional way of handling divorce is for the parties to engage lawyers whose expertise is limited to the legal matters,” points out Nina Mensing, a counsellor and FAMAC accredited mediator who specialises in family matters.
“Without help, guidance and support around all the other powerful aspects of divorce, it’s no wonder that it so often results in a bitter and traumatic fall-out impacting over the long-term not just on adults, but on children too.”
There’s growing awareness that there are significant benefits to doing divorce differently, and this is becoming more of an imperative if there are children in the family.
Research shows that respondents who went through mediated divorces reported less conflict in co-parenting a year after the divorce, whereas parents who had litigated divorces reported an increase in conflict (Sbarra & Emery, 2008).
“Mediation is based on a model of co-operative dispute settlement,” explains Nina, “The process aims to prevent the escalation of conflict between the parties, which is so easily fuelled by litigation.
"This is vital when there are children involved. In any divorce involving children, the relationship between the parents has to be maintained at a mature and suitable level so that they are capable of co-parenting effectively.”
- Your child comes first
- You can be a happy divorced family
- When parents divorce
Nina's 10 steps to doing divorce differently:
1. Make an informed decision, and be sure that divorce is the way forward
If divorce is presented as an option, it is important that both parties are well-informed about what lies up ahead before this decision is actually made. Reactive decision-making can have long-term negative effects on all involved.
It is important to know and understand all the different impacts and implications involved in a divorce, from the legal and financial ramifications to the practicalities of co-parenting and the effects of the identity shifts.
It gives both parties a sense of control over the process if they’ve done research, gone to counselling and experienced divorce coaching before they reach a decision to divorce.
2. Get the professional help you need
Divorce is an arduous process that can push the limits of our usual support networks. Each party needs to take responsibility for managing their emotions, expectations and the stress.
Going for individual counselling or coaching allows you to tap into a robust resource of independent, professional advice and support.
3. Get your finances in order
Make sure you understand your financial situation before discussing how to split your finances.
4. Empower yourself
Learn about the process. Learn about the law. Learn about what would be best for your situation and your family. You don’t need others telling you what you should be doing – this is your life and your family.
Don’t let others make decisions for you. Learn from others, get support from others, but make your own decisions.
5. Do not discuss adult subjects with your children
First and foremost is to not talk negatively about the other parent.
Children like to know what is happening in their lives. Allow them to ask questions, tell them what is going on, but do not go into details or blame the other parent for anything.
Be the adult, and let the children be children. Learn about how to co-parent effectively.
6. Stop defending yourself
Attacking and defending plays into the game of litigation, and is a never-ending cycle. De-escalate the conflict by not attacking and not defending – except in the case of abuse.
If the marriage is abusive then go through the correct procedures to ensure your safety, emotionally and physically.
7. Work with a financial planner
Do this together for the sake of the children, and also individually.
8. Go to mediation
An accredited mediator will facilitate the process in a collaborative manner, always with the children’s best interests as the focus.
Ongoing communication during mediation allows for more effective co-parenting during this difficult time.
9. After mediation, get independent legal advice before signing
The mediation process will result in the drafting of a negotiated divorce agreement. Go back to mediation if advised by your lawyer that the agreement is not fair.
Starting a litigation process (suing the other person) at any point will escalate the conflict, which will have an adverse effect on the children.
10. Remember that every decision that is made, and every action and reaction between the two of you, will affect the children
It’s easy to fall into a mode where it feels like the divorce is all happening to you. But divorce is never about an individual, it is a family process.
Think always about the children’s best interests – some times that means backing down and lessening the conflict rather than having full control over every situation.
Don’t win the battle to lose the war. Our children learn from us, and will learn how to handle conflict the way we do. Teach them that one can collaborate, and despite the marriage breaking down, that the two of you can still be parents together for their sake.
“It is important to re-frame the way we have always looked at divorce,” concludes Nina, “Divorce does not break families up; it recreates new types of families.
"How you divorce has a big impact on how you will co-parent and interact with your ex-spouse, for years to come. Doing divorce differently through mediation is essentially doing it in a far more mature and constructive way.”
Source: http://www.parent24.com/Family/Parenting/10-steps-parents-can-do-divorce-differently-20170510
If you’re in the early stages of divorce, you’re probably experiencing anger, betrayal, loss, shock, numbness, confusion, panic –or a combination of them all –and it may seem like you’re on an emotional rollercoaster, feeling “up” one minute and “down” the next.
Over time, though, these emotions will begin to stabilize, as you set your sights firmly on a bright, new future as a single woman. Clearly, your life will be different. But adapting to –and even embracing –these changes will help ensure your success. For example, as a single woman you will now be in control of your personal finances. You will have to keep a careful eye on your income, expenses and debt, if you have any. You’ll have to pay your bills, save and invest for your retirement, plan for college if you have children, map out other long-term goals --and plan for the savings and investments you will need to help you achieve it all.
Naturally that list of responsibilities may seem a bit daunting at first (particularly if you weren’t very involved with the family finances while you were married), but I assure you: You can do it! Take it step-by-step, learning as you go, and it’s likely you will find –as most women do –that it’s empowering to make financial decisions and to be the one who’s in control of your financial portfolio. Of course, working with a financial advisor who has the experience and training to specifically help divorced women accomplish their goals and objectives can be extremely helpful. Careful and conservative investments coupled with living within your means are the keys to making your divorce settlement last as long as it possibly can.
What can you do to stay on the best path forward? Here are a few key steps to get you started towards financial stability post-divorce. Once your divorce settlement agreement is finalized, you will need to:
Update accounts. Even though it may sound mundane, this financial housekeeping step is absolutely essential. If you changed your name as a result of the divorce, you’ll need to get a new Social Security Card, driver's license, passport and credit cards. You’ll also need to notify your bank, utilities, insurance companies, credit card companies, the motor vehicle department, your children's school(s), etc. about any change of name and/or address. The titles on all assets, such as cars and houses, will have to be modified and recorded with mortgage companies . . . and it’s likely you’ll want to update beneficiaries on your life insurance, 401k, pensions and IRA accounts, as well.
See the checklist below for an overview of many of the accounts and policies typically needing prompt attention post-divorce.
Develop a comprehensive financial plan. If you had a Lifestyle Analysis prepared during your divorce, you should have a very clear understanding of what funds came into the marriage (income) and what funds went out (expenses). Use this as a basis for developing a budget going forward. Of course, you’ll need to keep tabs on financial matters in the short-term (What are your day-to-day expenses? How much are monthly utilities, the mortgage, car payments, etc.?), and you’ll need to establish a plan for the long-term, as well (Who is going to pay for college tuition? What do you need to save for retirement?). If your divorce settlement agreement included any lump sum payments (for alimony, pension rollovers, sale of a vacation home, etc.), you’ll also need to develop a sound strategy for management of these assets. Establishing –and then sticking to –a financial plan is essential for financial stability . . . and peace-of-mind.
Build your credit. Good credit forms the foundation of your financial portfolio and will help you secure loans in your name in the future. The first step in building good credit is to get a copy of your credit report. (AnnualCreditReport.com offers them for free.) Your current credit score is the starting point for your future, so make sure you address any inaccuracies in the report. If you are employed and/or already have credit cards in your name, the process of building your credit will be relatively straightforward. Use your credit cards regularly, pay off the balance on time each month, and you’ll watch your credit score rise. However, if you’re not employed and don’t already have a credit history in your name, the process is not as simple. New federal regulations are making it more difficult than ever for women with little or no income to establish credit on their own, so prepare yourself for the possibility that securing credit could be somewhat time-consuming and is likely to require more than simply filling out an application or making a single phone call.
Seek help from an experienced financial advisor. Even more specifically, look for a financial advisor who is trained and experienced in working with women post-divorce.
All of the fundamental components of a sound financial plan-- creating a budget, investing, planning for retirement, making sure you don’t outlive your money, understanding your goals and aspirations (travel, leave money to children, grandchildren and/or charity, etc,) saving for college, life insurance, etc. -- should be completed under the guidance of an investment professional/advisor who is very familiar with the needs and issues of divorced women.
Remember: The financial needs of a divorced woman are very different from those of a married couple and you must have an advisor who completely understands those differences and knows how to properly manage your money and invest on your behalf.
For example, just as women all over the country depend on Bedrock Divorce Advisors, LLC to help them before and during their divorce, many of these same women (and others, too) rely on our sister company, Bedrock Wealth Management, LLC, post- divorce to help them make their divorce settlements last as long as possible.
Using our many years of experience and specialized training, we assist with a wide range of financial concerns, including:
- Budgeting
- Retirement planning
- Asset protection and insurance
- Estate planning
- Investments
- College savings
Add other experienced professionals to your post-divorce team, as well. In addition to an experienced financial planner, I believe most post-divorce women can benefit from the assistance of:
- An estate-planning attorney. This type of lawyer will work in conjunction with your financial advisor to help you with your estate planning needs and the legal issues concerning your will, medical directives, trusts, charitable giving, etc.
- A therapist or counselor. A compassionate therapist will help you cope with the emotional challenges associated with starting your life as a single woman.
- A vocational counselor. Need some tips for re-entering the job market? Or, perhaps you want to start your own business? A vocational counselor can provide the guidance and know-how so you make these transitions successfully.
Check and double-check to make sure you’ve completed everything on this post-divorce “To Do” List:
1. Obtain a copy of your certified divorce decree. Make extra copies, and store them in a secure location.
2. Close any joint credit accounts.
3. Remove your husband’s name and/or change your name/address on all remaining accounts, including:
- Bank, brokerage and investment accounts
- Credit cards
- Driver’s license, automobile title, registration and insurance policies
- Employer’s records
- IRS records
- Life, health, homeowner’s and disability insurance policies
- Post office (Remember to have your mail forwarded, too.)
- Professional licenses
- Social security card
- Title to real property
- Utility bills
4. Research your health insurance options and apply for COBRA, if necessary.
5. If your divorce decree requires a Qualified Domestic Relations Order (QDRO): Provide the QDRO to appropriate banks, brokerages, pension plan advisor, 401k administrators, etc. (Even better, have this step completed before your divorce is finalized!)
a quitclaim or warranty deed: Make certain the appropriate documents are executed and recorded.
the transfer of title to property (automobiles, boats, etc.): Complete the transfer by signing and delivering the necessary documents.
6. Open a new bank account. Consider establishing direct deposit or income withholding for child support, spousal support and/or alimony payments.
7. Open a new credit card account and request a copy of your credit report.
8. Disinherit your husband. Write and execute a new will, trusts, medical directives and/or living wills and powers of attorney. Don’t forget to change the beneficiaries on your life insurance, 401k, pension and IRA accounts.
9. Establish a system to keep track of all child support made/received, alimony payments made/received, medical expenses, etc.
Enjoy your new life. Once you complete the previous six steps, you will be well on your way to establishing a secure financial foundation for your future. After all, nothing nurtures self-confidence like firm footing and a solid plan, one that offers you positive reinforcement every step along the way. You’ll learn to stick with a budget, strengthen your credit score and manage your assets. Then, you’ll be able to set new goals and achieve even more.
Source: https://www.forbes.com/sites/jefflanders/2012/07/25/seven-must-do-steps-for-women-who-want-financial-stability-post-divorce/#66de57056ec2
- While a divorce may catch your family off guard financially, you can still take steps to make sure college tuition bills don't throw you off as well.
- The dissolution of your marriage should prompt you to revisit your plans.
- How you approach higher education may also need a second look.
Anticipating college tuition bills is nerve-wracking for most parents — and can be even scarier if you're in the midst of a divorce.
Yet careful planning can help ensure you put your children in the best possible position to get a higher education following the dissolution of your marriage.
About 4 in 10 marriages end in divorce, according to a recent study by TD Ameritrade. Yet two-thirds of married couples don't have a financial plan in the even of divorce of a spouse's death.
That can have a real impact when it comes to planning for college costs, which have been going up at a rate of at least about 3 percent per year, according to the College Board.
"If you are getting divorced, it's harder. There's less money to go around."-Aviva Pinto, Bronfman Rothschild
Tuition, fees, and room and board cost an average $46,950 for the 2017-2018 school year for a private nonprofit four-year college, according to the College Board, and $20,770 for a public four-year in-state school.
By taking the proper steps in advance, you can help protect those college dreams.
"Trying to plan for it is the best thing, even if you're not getting divorced," said Aviva Pinto, a certified divorce financial analyst and director at Bronfman Rothschild. "If you are getting divorced, it's harder. There's less money to go around."
Be realistic about your situation
Splitting a household in two can have a big impact on plans for funding a college education.
Providing child support for minor children and spousal support come before spending on higher education, according to Nicole Sodoma, a family law attorney and managing principal at Sodoma Law.
"Most people are surprised to know that if there was a plan in place regarding how to pay for college, the plan to pay for college sometimes has to take a backseat to the family's expenses," Sodoma said.
While some states require parents to pay for college, others do not.
What the court requires parents to pay for often depends on their financial situation and background, according to Madeline Marzano-Lesnevich, national president of the American Academy of Matrimonial Lawyers.
"They basically say send the child to the best school they can get into if they can pay for it and if that's where the child wants to go," Marzano-Lesnevich said.
That means that a parent cannot have the court make it mandatory for the other parent to pay for their child to attend Harvard if the money is not there. Likewise, graduate school is usually off the table.
A lot of agreements Marzano-Lesnevich draws up often include a maximum of five years for college payments.
"Everyone wants to know, 'When is this going to end? When are my expenses going to end?'" she said.
Understand your plans may change
You may have to scale back your children's education as you scale back the rest of your life, particularly as you go from one household to two.
"Those expenses are doubling what you used to have to pay while you're living together under one roof," Pinto said. "There's only one pot of money. It can only go so far."
Consequently, parents may want to re-evaluate whether their children will attend private or public colleges and if they want to pursue scholarships, grants and student loans.
Other alternatives, like deferment or discounts for multiple children, can also help defray the costs, Pinto said.
Invest in a 529 plan
Saving for college through a 529 plan is often the most ideal for all parents saving for college.
That is because the money accumulates tax-free and you do not pay taxes on it when it is withdrawn, provided that money is used to pay for valid education expenses.
"Sometimes the college conversation is an afterthought."-Melissa Joy, Center for Financial Planning Inc.
Ideally, parents will have already established 529 or other accounts devoted to putting money away for college before they enter divorce proceedings, according to Marzano-Lesnevich.
If those funds are already earmarked for education, it reduces the need for divorcing parents to find that money elsewhere, say from the sale of the marital home, she said.
A 529 plan is typically owned by one parent. But because it is possible to change a 529 account owner or beneficiary, or the funds can be withdrawn, it is important to outline specific plans for those savings in a divorce agreement, according to Melissa Joy, a certified financial planner and partner at Center for Financial Planning Inc.
"That's something you want to document in the settlement," Joy said.
Parents may want to consider splitting the 529 plans in two, depending on the level of trust in their relationship. Or they could make it possible for both parents to monitor the account.
Seek expert financial advice
While attorneys are great for legal advice, it pays to also include a money expert in your divorce proceedings to help you understand your financial picture.
Because college costs can outlast child and spousal support, it is often what ties parents together for the longest period of time, Joy said.
Looping a financial planner in on the conversation while you're working on your divorce agreement can help ensure you're prepared when the college tuition bills start rolling in.
"Sometimes the college conversation is an afterthought," Joy said. "The earlier you loop them in, the more you have control and knowledge."
Source: https://www.cnbc.com/2018/05/18/how-to-keep-your-divorce-from-sabotaging-your-childrens-college-education.html
