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How to Have a Happy Financial Divorce

paper chain family being cut with scissors

When you’re going through a divorce, emotions run high. You’re forced to face the reality that what you had planned for your life is changing; many psychologists relate this grieving process to mourning the death of a loved one. As you work through that emotional process, you also must take care of finances, a task which requires you to be rational, objective and cool-headed.

Balancing the grief with numbers requires some planning, especially because you’re not only dealing with your behavior and decisions, but also those of your soon-to-be ex. Despite its challenges, amicably navigating finances through a breakup has many upsides – not the least of which is saving money long term. We’ve gathered some of the best tips from those who have been through the process personally, as well as from professionals who work in the fields of divorce mediation and litigation.

Know Your Budget

Lori Lustberg is a Certified Divorce Financial Analyst®, mediator and lawyer. She herself has gone through a divorce, and settled finances amicably with her ex. Today, the two are successfully co-parenting their thriving, teenage son.

Lustberg says it is highly important to have a firm grasp on your own financial situation. Know your debts. Know your assets. She also advises familiarizing yourself with these key pieces of information:

  • Your income
  • Your spouse’s income
  • Your expenses
  • Your spouse’s expenses
  • Combined household expenses

“But the most important key to the whole thing, in my view, is budgeting,” says Lustberg. She clarifies that you shouldn’t just be looking at your budget today, but also your budget moving forward. “Once you know that, the rest is so much easier and less stressful. I make my clients do background homework, or I will work with them and hand-hold them through it. But it has to be done.”

Evaluate Goals and Values Creatively

Crystal Thorpe of Agreement Resources, LLC concurs that budgeting is one of the most important components of settling amicably. “Preparing and sharing budgets can be helpful on a number of levels, both to consider whether the budgets are realistic and manageable, and also to help inform each other on where the money is going, and why there might be a need for more support for either spouse. The budgets are also important to consider when looking at division of assets.”

She stresses that sharing future goals and values is an important part of this process. She once worked with a distressed couple who wanted the mother to stay in their family home with the children until they graduated high school. They also wanted to find a way for the husband to start his life anew, but they could not afford a down payment on his new residence without selling the family home.

Or so they thought. "We encouraged them to think not only about each individual asset, but also to look at the whole picture of all their finances,” says Thorpe. Because both goals were important to both parties, they decided to allocate a larger percentage of the savings to the husband so he could afford a separate home, allowing the wife to “buy out” part of the husband’s share of equity in the house. The wife kept more of the house, and paid off the husband’s remaining equity over time, while also paying off the mortgage at a slower clip commensurate with her income. This allowed both parties to get what they wanted, not just for themselves, but for each other and the children.

"Try to think creatively about how you can meet each other's goals,” says Thorpe, “so that in the long run you can both be happy."

Think About Expenses Beyond Age 18

Jan Keenan of Keenan and Austin, P.C. agrees that evaluating these goals is helpful, particularly when it comes to matters involving children.

“Are private school, summer camp, music lessons and/or other extracurricular activities important to the parent? Then it should be negotiated and set forth in the judgment of divorce, how each parent will be responsible for those costs.”

She also recommends that parents consider the cost of college before filing the final paperwork. “Since the obligation to support a child ends once the child turns 18, each parent's responsibility for college expenses must be mutually agreed upon and set forth in the judgment to be enforceable.”

After the particulars are worked out, Thorpe recommends using online resources to ease communication regarding shared-parenting schedules, and to track and allocate child-related expenses. Jamie Yamagata of The Small Business Mom uses a similar method, uploading all children’s expenses to a shared Google Doc with her ex-husband.

“My ex makes significantly more than I do,” Yamagata says, “so we take the ratio of his pay to my pay, apply that to the monthly total of the kids’ expenses and pay each other back as needed.”

More than Money

Sometimes in divorce, especially if it goes to litigation, there is a divisive focus on money that further damages the relationship. Thorpe recommends looking beyond dollars and cents:

“Sometimes good relationships and peace of mind are more important than getting every last cent from the other person. Really think about what you want from the divorce, what story you want your children to tell of the divorce going forward, and what you want future interactions with your former spouse to look like.”

Many elements contribute to making informed, comprehensive agreements that feel comfortable and fair for both spouses. While finances are critical, sometimes there are factors that deserve heavier consideration than money.

Ways to Settle

When we think about divorce, the first thing that pops into our minds tends to be a courtroom with a spouse at either table, flanked by their individual lawyers. While expensive litigation certainly is one way to settle a divorce, the courtroom is far from the only outlet.

The Kitchen Table

Miranda Marquit of Planting Money Seeds used no third party when successfully filing her divorce. Instead, she and her husband worked things out rationally.

“We essentially sat down and figured out what we wanted to have happen, and what would work out best for us in terms of dividing our stuff, getting us each established in new homes, how to handle our son's living arrangements and other items.”

Marquit, with the support of her ex, decided to move back to Idaho with their son to be closer to family. Because Idaho’s divorce laws were easier to navigate, the couple decided she would file upon her arrival, utilizing her uncle’s services as an attorney. “I presented our agreement to my uncle, who worked out the language and took care of everything to our specifications.”

While they successfully worked their way through their finances independent of outside help, that’s not to say they were immune from the emotions that accompany the divorce process. While there was hurt and pain, they combatted these feelings with mutual respect.

“Even though I was hurt by my ex's request for a divorce,” explains Marquit, “I realized quickly that it was in both our interests to move forward and get established separately with minimum fuss. It's less expensive, and it's better for us and for our son. The key is being able to look at it long term, and look for ways to ensure that you both get the best new start possible. In order to do that, I had to move beyond my hurt.”

“My ex didn't want to draw things out, and he didn't want to ruin me,” she says. ”He was helpful and didn't make demands. That respect is key, as is a realistic view of who will be taking care of what, and who is going to wind up with true financial burdens.”

The Marriage Counselor

When Yamagata went through her divorce, she and her husband already had been seeing a marriage counselor. When they decided to split, they continued their sessions. “That made a big difference with becoming amicable,” says Yamagata. “Talking about custody and finances with [the counselor] in the room made the discussion more productive and focused on the kids, and eventually that worked its way into our everyday interactions.”

Mediation and Collaborative Law

While the counselor served as a neutral third party for Yamagata, others may prefer the route of mediation. Professionals in the field of divorce mediation have the background, training and resources to help divorcing spouses make their own informed decisions.

“We give information, but not advice,” Thorpe says. "We’re there to support both parties. We help them better communicate, think through what is important to them and brainstorm options."

If you feel more comfortable with personal representation, another avenue to pursue before traditional litigation is collaborative law. “Collaboration offers a middle ground between mediation and full adversarial litigation,” explains Meghan Freed of Freed Macroft. “Like mediation, it is a voluntary process. The major difference between mediation and collaborative divorce is that in a collaborative case the parties are never ‘on their own.’ Each spouse is fully represented throughout the negotiation by his or her own collaborative attorney. “

Freed explains that collaborative law also can involve a financial neutral. That person can be a Certified Divorce Financial Analyst®, Certified Public Accountant, or Certified Financial PlannerTM, with additional training from the International Academy of Collaborative Professionals.

“The financial expert is neutral, so he or she doesn't take the side of either party, but instead guides the parties through the financial process. This creates a safe environment for both parties, especially when one party is more familiar with the couple's finances. The financial neutral assists by gathering, organizing and analyzing the financial information, educating and answering questions, and assisting the parties in objectively reviewing their options.

In my experience,” adds Freed, “couples who chose these alternatives are much more likely to amicably navigate their finances through the divorce process.”

Traditional Litigation

If it comes to traditional litigation, Drew Vaughn’s best advice is to be overly generous early. Vaughn, the owner of NuVorce Law Firm and professor of advanced domestic relations law at Loyola University Chicago School of Law, recounts a case in the not-so-distant past demonstrating the power of generosity.

A CEO of a real estate company was facing divorce litigation against his wife, an attorney herself. Before the case even was filed, he prepared an offer for alimony, child support and property that struck even the judge as abundantly generous. The couple settled after appearing in court only once, saving them costly legal fees.

“The bottom line is, at the end of your case, you can send your children to college or your divorce attorney's kids [to college],” contends Vaughn. “Being overly generous early can help you get the right outcome.”

[Any reference to a specific company, commercial product, process, or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]

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