Financial Planning For Divorce: The Long-Term View

For many people going through the stress and pain of divorce, there is a tendency to think only of the immediate future when dealing with financial issues surrounding the divorce. When faced with financial decisions they often say they “don’t care”, they just want to get the whole thing over with. But without proper analysis and planning, the financial ramifications of decisions made during a divorce can last a lifetime.

To get the best perspective on the financial consequences of various options in a divorce settlement, Divorce With Dignity providers (findaprovider.dwdignity.com) often advise clients to work with a Certified Divorce Financial Analyst (CDFA). CDFAs have specialized training in financial issues pertaining to divorce, and can help forecast the short and long-term effects of different divorce settlement scenarios, empowering clients to make informed decisions about their future.

Susan Campbell, Principal of Buena Vista Financial Resources (www.BVFinancialResources.com), is a CDFA who also has over 20 years experience as a Certified Financial Planner. I often refer my clients to her, and I asked her for some advice on long-term financial planning for divorce.

What are some implications of focusing only on the present/short-term financial arrangements (and ignoring the long-term issues)?

One of the most common scenarios is that one of the spouses wants to keep the house, and so they trade off other assets in order to do this. But what often happens is that they end up going through their savings and run up their credit cards due to unplanned expenses for maintenance. A CDFA can help determine what the costs of keeping the house will be.

Another thing divorcing couples often do is fail to recognize that their relationship is likely to change over the years. A couple may be amicable now, but a few years later one of them could remarry and the new spouse may have very different feelings about some of the financial arrangements. That’s why it is so important to make sure your divorce agreement is complete. Five years from now you won’t be able to go back and say, “Oh, I made a mistake,” and make changes.

We help focus the conversation on the long-term and help people remove the emotion that is always present in these conversations. I tell people to “put on your business hat” and treat this as a negotiation.

What are some of the considerations that are often overlooked in the financial aspects of a divorce settlement?
The most common one I see is when someone has a pension. Those accounts are not the same as an IRA and must be valued by a pension valuation company. You may know how much you will get at retirement, but it is difficult to determine the current value of the pension for purposes of a divorce settlement.

Do you have one piece of financial advice that you’d like to offer someone who is contemplating divorce?

Focus on the long-term; with planning, future problems can be avoided.

Remember that there is rarely one “perfect” solution that will work for both of you, so know what your priorities are and be willing to compromise. There is one “pie” that now needs to be split, and you don’t each get your own whole pie.

The providers in the Divorce With Dignity Network are dedicated to assisting our clients according to their unique needs as we guide them through the divorce process. As part of our service, we can refer them to specialists like CDFAs for more in-depth help. If you are contemplating divorce, we urge you to get the planning help you need to ensure your best possible future. Learn more about how we can help you get through your divorce with careful preparation – and dignity – at findaprovider.dwdignity.com.