According to recent press, January is referred to in some legal circles as Divorce Month. It seems that the start of a new year feels like the right time for many to call a divorce attorney or mediator.
In addition to the obvious emotional reasons for delaying action, divorce can be postponed because it can be financially costly for both parties.
What I do know is that building financial and emotional resilience before painful life transitions can prepare us for the best possible outcomes.
Tuning in to what really matters
In my work as a financial wellness coach I support women going through divorce to set themselves up for sound financial decision making—before, during and after the legal proceedings. This includes tuning in to her innate strength, and the emotional connections she has to family, home, geography, and belongings. Beyond the obvious importance of tuning into these things, gaining clarity on what really matters helps her focus on what’s worth the emotional toll to ask for when it comes time to dividing up marital assets.
Gaining confidence and control
For women who have managed just one slice of the family’s finances, our coaching includes creating a digital list of assets, debts, and monthly expenses. We talk about credit, debt, investments, real estate, etc and I can fill in any knowledge gaps that exist. We also work on creating a positive vision of her future post-divorce, so she can start to visualize herself on the other side of the mountain.
I typically support my clients over a period of months as they weather the transition. I support them by coaching women through money ‘curveballs and conundrums’ so they can make informed and objective decisions. Feeling a sense of control over the future is key; it may surprise readers to learn that no matter how smart, resourceful, or wealthy a woman is, she likely carries a deep-seated fear of ending up alone and poor.
Calling in the Financial Dream Team
Because specific investment and tax advice is beyond my legal capacity, I have a vetted “Financial Dream Team” to refer clients to. Certified Financial Planners (CFPs) and Certified Divorce Financial Analysts (CDFA) help people walk through scenarios for best possible outcomes for the assets that will be divided by the couple.
I reached out to Lara Lamb, a CFP® with Abacus Wealth Partners and a Certified Divorce Financial Analyst (CDFA) to ask her for specifics on how her firm prepares its clients for sound financial decision making during divorce. (Note: I recommend and trust the team at Abacus because of their ethical and holistic approach to wealth management and I do not receive referral fees for any of my Financial Dream Team partners).
E: What’s the most important thing a woman going through divorce should think about or do regarding her money?
Lara: Well, as you can imagine there’s quite a lot of emotion and turbulence swirling for people, and as we know, emotions can overwhelm and cloud the decision making process. We have a process for talking our clients through the decisions they’ll need to make, starting with their values priorities in the divorce. I’d say the most important thing is to seek financial support from an objective professional as soon as possible who will help you make educated decisions.
E: What’s an example of your approach to these discussions?
Lara: One common question is whether or not someone can afford to keep living in their primary residence. Just like you do, we ask questions to figure out which assets she truly, deeply wants to maintain versus those she can more easily let go of. Then we help her work through the financial details of each of the options.
E: Give me a specific example, if you could.
Lara: Well, one client had a 13-year old son and wanted to keep the house to minimize disruption for him. I knew why she wanted that emotionally, so we crunched the numbers to find out whether she could afford it financially. We ran various scenarios that took into account her income and other assets, and while we confirmed she could afford to stay in the house, it was a financial stretch. Armed with the actual numbers, she decided she was willing to reduce some expenses now to keep the house, and would downsize (sell) after her son turned 18 and left for college. In my view, that’s a perfect example of a client making a conscious choice to increase emotional stability in the present, while planning intelligently for the future.
E: You likely know that 66% of Americans don’t follow a monthly budget, and many women are at a loss to know how much they need to maintain their lives in a post-divorce household. Recently I helped a client pull that data together and create a digital version of her monthly expenses. Because she’d been a stay at home mom, she needed to request monthly ‘maintenance’ from her husband. Going to her divorce attorney with that figure in hand not only gave her a feeling of being smart and in control, it saved her a few hundred dollars (because the attorney would have had to charge for the time to do it). Lara, how do you interface with family law attorneys to support the same client and advocate for her best financial interests?
L: I’ve seen situations where a mediator is used for divorce proceedings, and although this can be a less acrimonious way of handling divorce, mediators aren’t always equipped with all the financial and legal expertise to advocate for both people fairly with regard to equitable asset division. And, in fact, their job isn’t to come to a fair and equal settlement, but to simply get both parties to agree. For example, simply trading home equity for equivalent dollars in an IRA is absolutely not a dollar-for-dollar trade, if you consider taxes. I like to coordinate with the client’s attorney to ensure we’re all on the same page with the final settlement numbers, so that it’s in both partners’ interest; not just his, and not just hers. I recall cases where I’ve saved clients tens of thousands of dollars by properly calculating assets to create an apples-to-apples value, thereby giving all parties a fairer agreement.
E: That’s awesome, and it makes it crystal clear to me why people going through divorce can make a very smart decision to invite in a Certified Divorce Financial Analyst (CDFA) like you. I also recall you sharing that going through your own divorce inspired you to get certified to help others through the transition. I know you ‘get’ that helping people weather this major life transition goes way beyond the numbers, doesn’t it?
L: At Abacus, we absolutely care about the clients’ entire experience and want the best possible outcomes. I’ve seen time and time again that the best decisions, both for the short term and long term, are derived from one common denominator: Clarity with your numbers. Without that, it’s too easy to swim solely in emotional waters and that’s when divorce can be truly financially devastating. We’re here to help people avoid that.
E: I love that we are both focused on clarity with one’s numbers. I see the process of coaching my clients to financial wellness as a process. For those going through divorce or another big life transition like losing a job or spouse, the process often follows a path something like this: Clarity–>awareness–>educated choices–>practice–>control–>practice–>relief–>closure. Thank you, Lara, for the great work that you do for your clients.
Dear readers, I hope you’ve enjoyed meeting Lara and will let me know if you’d like a personal introduction to her. If you reach out directly, thanks for sharing that you read about her here! I know she’ll have your back.
To learn more about my financial coaching services and workshops and webinars that I offer online and in Sonoma County, CA, book a free 30-min phone consult with me. Join my email list for carefully vetted stuff women need to know and get my free ‘Top 10 Habits of the Financially Savvy’ to tape to your mirror.