A lot of the topics I write about get me excited. Saving, investing, budgeting and paying down debt create a framework for financial success. So even if they aren't flashy, if you read about them at the right time, the message can inspire actions that propel you to a better place. To me, that's motivating.
On the surface, an article about divorce may not hold the same promise. However, if you think about it, it really does. Doing a divorce "right" can help you avoid a big financial hole and allow you to stay on track -- or as close to on track as possible -- so you can achieve the goals you have for you and your family.
If you find yourself walking this path, these five tips can help you mitigate divorce's negative effects:
- Get the right help. Combine all that's at stake with the complex laws on this subject, and it's clear to me that most folks will benefit from professional guidance. Engaging an attorney, a certified divorce financial analyst or an accountant shouldn't be interpreted as an act of war. In fact, a lot of times, the old saying, "we don't know what we don't know," accurately captures the necessity. Each situation's unique aspects -- such as military service, for example -- make getting qualified help critical. Of course, you also may want to consult with an accountant or a financial planner to truly understand the short- and long-term financial and tax consequences of divorce.
- Don't let emotions throw you off track. Having seen the impact of divorce among family and friends, this statement almost seems farcical. However, if we take an honest look at our personal history, we all probably can see situations -- purchases, job moves, investment decisions, etc. -- where emotions were not helpful. It's hard to imagine a more emotionally charged situation than divorce. Use your counsel and the counsel of those you trust to navigate this difficult time better.
- Dig into the details early. Commit to "making it happen" rather than "letting it happen to you." Early on, focus on gathering all the details and data: tax returns, financial statements, pay stubs, benefit information, assets and liabilities. This is especially important if you have been less involved in your family's finances. All this information will help provide you and your team with a comprehensive lay of the land.
- Understand Social Security and other benefits. There are a lot of unique rules when it comes to retirement plans, Social Security and military benefits. For example, the Uniformed Services Former Spouse Protection Act allows, but does not mandate, military retirement to be divided as property by state courts. Social Security has an array of rules regarding divorce and, in certain circumstances, allows a former spouse to receive benefits based on an ex-spouse's earnings record. While we don't have the space to go into the details here, it points out the importance of my first point: Get good help.
- Build your plan and follow through. Several years ago when I had my own book of clients, I met with a divorced client. As I was reviewing her account statement, I noticed she had a large jointly owned investment account. The curious part? Her ex-spouse was on the account with her and had complete access. Oops. Whether it's updating beneficiaries, retitling assets, closing all joint accounts or establishing credit, deposit accounts and acquiring insurance in your own name, find the energy to follow through.
It's hard to imagine divorce being a seamless experience, but you can make it less painful from a financial perspective by focusing on what you can control.