DIVORCING FINANCIALLY: FIRST STEPS
by WAYNE A. STARR, CDFA™, CFP ®
(Certified Divorce Financial Analyst, Certified Financial Planner)
ASSET ANALYSIS, LLC
After 12 years of marriage notable for the births of three boys, the husband’s infidelity, emotional and some physical abuse, and money problems, my mother asked me: “What would you think if we didn’t live with your father anymore?” No twelve year-old should have to answer that question.
Arriving at the decision to divorce a spouse is loaded with emotional and financial issues. Even if finally making the decision to end the marriage provides a sense of relief you are still entering an uncharted forest in which you are likely to feel that you don’t have the skills to deal with all that faces you. The balance of this article will deal with the financial expertise, my area of expertise.
Regardless of what you think you lack in money knowledge, you must deal with the reality of your financial situation. It is time to take control of your life which will lower your stress level. There are four categories that define your financial situation: assets, liabilities, income, and expenses. I recommend that you spend $9.95 plus shipping to obtain “The IDFA Divorce Survival Guide” by Fadi Baradihi CDFA™, CFP® and Nancy Kurn CDFA™, CPA, JD from Amazon.com. If you have selected an attorney or will use the services of a Certified Divorce Financial Analyst you will be supplied with the forms both required by the Court and necessary for the recording of the following information.
The first category is assets and is what each of you own individually and/or jointly with your spouse. Start making a list of cash, checking accounts, savings or money market accounts, all retirement accounts (IRA’s, 401(k)’s, defined benefit plans, defined contribution plans both government and private), non-retirement investment accounts, real estate of all kinds, and employer funded incentive programs including stock-options and banked vacation and sick days.
What you own individually and /or jointly is what will be divided in the settlement process. Be exhaustive and inquisitive in your search for all the assets. If you don’t know or can’t remember about an asset, put it down with a question mark. You and your attorney can flesh it out later.
The flip side of asset is liabilities. What do you owe, to whom, how much, and what are the payments? Debt associated with an asset, in general, goes with the asset. Whoever gets the vacation home should get its mortgage.
The Third category is income. You know what you earn and have payroll stubs to show the most recent earnings, the associated deductions, and year-to-date amounts. Look at the last two years of income tax returns to identify and list other income sources. If you regularly receive monetary gifts from relatives make sure that your attorney and CDFA™ are aware of them in amount and frequency.
Finally, at the heart of your financial reality are your expenses. You need to prepare a complete list of your current and post-divorce expenses. Following a divorce, whatever amount of income has supported the household must now support two. A spouse’s need is a key element in determining the amount of alimony, now referred to a separate maintenance.
Listing assets, liabilities, income, and expenses isn’t just an exercise. It is empowering. It is the first step in taking control. It will cast a bright light on the unknown and make it less scary. You are divorcing physically, emotionally, and financially. Taking control financially can help you to cope with the other two.
You can contact Wayne Starr, President, Asset Analysis, LLC at 816-225-3441 or assetanalysisllc@kc.rr.com.