by Rick Kahler
Few occasions in life are more joyous than a wedding. It's typically filled with celebration, romance, and the promise of spending a lifetime together.
Conversely, there are few things as painful as the ending of a marriage that began with such promise. The unfortunate reality is there's a 50-50 chance that what started out in wedded bliss will end bitterly in a court of law.
If you are heading into a divorce, here are a few tips that may make the transition a little easier financially.
While I’ve seen many divorces start out "amicably," I’ve seen very few end that way. While your divorce may be the exception, I would suggest you plan for things to get contentious.
A divorce is more than the termination of a marriage. It’s also a major financial event that can have repercussions for many, many years to come. Think of it as the dissolution of a business. This is not something you want to go about casually or do on a handshake. You need to get competent advice—sooner rather than later.
The type of advisors you will need depends greatly on your situation. The more assets you have and the longer you’ve been married, the more advisors you may need.
A young couple married only a short time, with very few assets or liabilities and no children, may very well be able to use one attorney or a mediator to settle things quickly and fairly. A couple married 15 or 20 years, who have children and who have accumulated assets and liabilities, will certainly each need an attorney. They would also do well to each engage a therapist for themselves and their children. They could also benefit from consulting with an accountant, financial planner, and an appraiser if they own real estate.
If you’ve been a "stay at home" spouse and sacrificed your career to raise children, you would greatly benefit from getting some career counseling. While you may receive child support or some alimony from your former spouse, the chances are it won’t be for as much or as long as you would like. There is also the risk that your former spouse may pay erratically or not pay at all.
Unless you can live exclusively off the earnings of assets received from the divorce, you will need to become employed. For anyone who has been out of the workforce for a long time, this may mean heading back to school and obtaining several years of education. If you can’t find or afford a career counselor, a great book with a lot of helpful exercises is Career Ownership by Janine Moon.
There is no greater threat to your net worth than a divorce. Unless you are very wealthy, it’s a financial game changer. The reality is your lifestyle will almost certainly decline. It’s critical to actively plan for that new lifestyle as part of the divorce process. Creating a spending plan is very important. Is this difficult? Yes, for most folks it is. It's hard enough to create a spending plan in good times, much less in the chaos of your world being ripped apart. Yet this will give you vital information to help you evaluate and intelligently respond to settlement proposals.
Finally, resist taking the attitude, "I don’t care what it costs me, I just want to be done with it!" Avoiding the discomfort of negotiating and dealing with conflict may seem easier now. Yet chances are great that you'll regret it later. A divorce is financially and emotionally devastating enough. Don't make it worse by allowing your own beliefs to sabotage your future.
Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!