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Divorce and Your Money - #1 Divorce Podcast

Visit us at www.DivorceAndYourMoney.com Divorce and Your Money is your guide to avoiding costly mistakes during divorce. Shawn Leamon, Certified Divorce Financial Analyst and MBA, wants to help you learn the fundamentals of how to get a divorce. Whether you are looking for an uncontested divorce, a do it yourself divorce, or an online divorce, resources are available to offer guidance. Through his divorce podcast and divorce blog, Shawn offers his professional opinion on the best ways to handle the end of your marriage. He covers topics including how to file for divorce, divorcing a narcissist, and finding the best divorce attorney. Even tricky subjects such as a “what is a QDRO?” and “is alimony taxable?” are tackled through these venues. If you need to know what the first steps are or what you should do to head to trial during litigation, you can find resources to give you a step-by-step guide to what comes next. Think of his advice as an alternative to divorce support groups where you can find exactly what you need when you need it. He offers one-on-one divorce coaching to give you a solid grasp on the decisions that are bound to affect your financial future. Before you have a divorce decree in hand, you will likely go through some type of divorce mediation. For any spouse saying, “I want a divorce,” you need to make sure that you are getting the financial future you are entitled to. Do not allow yourself to be blinded by the emotional, legal, and financial burden that divorce can become. Instead, take control of your situation with sage wisdom to help all individuals make better financial decisions for their independent future. If you find yourself asking “where are the best divorce lawyers near me?”, Shawn can help you to recognize the best of the best. Whether you need a divorce in Texas, a divorce in Florida, or a divorce in New York, you will have all the knowledge you need to find the best team of professionals to assist you. You can start from a place of being legally separated or once you have already started to file for divorce using free divorce papers or an attorney. No matter where you or your marriage may be in the process, Shawn Leamon has professional advice to offer your unique situation. A simple no fault divorce or a high-stakes power struggle are all areas he has vast experience with during his work outside of Divorce and Your Money. Let his advice be a guide to help you get all that you need for a secure financial future in your divorce records. It will not make a difference whether you are getting a divorce in Ohio or a divorce in California if you are following the basic principles set out through Divorce and Your Money’s divorce blog, divorce podcast, and divorce coaching.
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Dec 5, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

 

Thank you for listening! Find a transcript of this episode below.

 

When negotiating a divorce settlement, you need to understand what trade-offs you're making, and make sure that you're keeping the big picture in mind. When it comes to your assets, and the debts that you have in your financial life and your marriage, they are what they are. When you're thinking about your divorce settlement and your future, your goal, really, is to figure out what the best combination of assets is for you, so that you can move on with your life in the best way possible.

 

You need to be realistic and reasonable, and make sure you're negotiating for things that make sense for you. One of the biggest areas I see people having trouble is not being accepting of what the status quo, what today, what their actual financial picture is, and not confronting head-on what you actually have. I understand everyone wishes they had more money, more cash, less debt, higher income, or whatever it is. What I see, oftentimes, in the divorce process, when working with you, is that you might feel, or at least pretend to negotiate as if you have a higher income than you have, or as if you have more money than you actually have. I'll say this on calls all the time, it's okay to advocate for yourself and ask for a little bit more to that you get ... you have wiggle room. But at the same time, you need to be realistic about your financial picture is and what your future looks like, and be real about how that's going to work for you in the future.

 

One of the first steps when it comes to negotiating and thinking about your divorce settlement, and preparing and structuring things the way that you want to do, whether you're working with a lawyer, you're doing it yourself, going through the litigation process, doing collaborative divorce, or whatever, is you really need to understand what you have and what you're splitting with your soon to be ex-spouse. Not only do you need to know what exists, be it a house, a mortgage, rental property, investment accounts, cars, a business, all of the basic stuff that we talk about a lot on the show, but you need to understand the value of those things with clear numbers and specific. It's not enough just to say, "I have a house, and I think it's worth $400,000." That's not right. You need to do your homework and figure out either with a real estate agent, or an appraisal, or whatever the case may be, whether it's $400,000 or whether it's 375 because of something, or maybe it's 437,000 that you could sell it for. You need to understand the value of that. You need to understand, if you have a rental property, if you have a business, what is that worth? Because knowing that value could serve as a big impact on your divorce process.

 

When I comes to knowing the worth of things, you need to know what that means in total. One of the questions I'll ask you is, I'll say, "Hey, let's break down the major assets. Let's figure out what you have. We'll subtract out any debts." But what is your total marital pot worth? Is it $325,000? Is it 3.2 million dollars? Or more than that? Or somewhere in-between? Or somewhere less? Whatever the number is, you need to clearly understand and keep in mind the total value of all of your assets as you're thinking about your divorce settlement.

 

And then, from there, you also need to understand and have a clear sense of what support obligations you'll either be paying or receiving. This is an important point and is relevant to the total calculation of stuff that you're splitting up, and you need to understand that number. I'm going make you some simple numbers just for the sake of discussion on these two point; the total value of your assets, and then also the support discussion, to illustrate an example for you.

Let's say the total value of all of your assets is $200,000. That means any houses, bank accounts, retirement accounts, everything totals up to $200,000 between you and your soon to be ex-spouse. Now, let's say, on top of that, you're expecting to receive some sort of financial support obligations. For the sake of discussion, I'm going to assume that you're going to receive $5,000 a month for five years, which means $12,000 a year, times five years, is $60,000 in support. Now, if you think about that, that actually adds to the total amount of money that you are splitting up, because not only are you splitting up $60,000, but on top of that ... I'm sorry, not only are you splitting your $200,000 in marital assets, but there's also an additional $60,000 on top of that that you need to keep in mind.

 

Now, why is that such a big deal? Well, that's a big deal because when it comes to negotiating a divorce settlement and thinking about your options, is that you need to understand that regardless of what you do, there's always benefits and disadvantages and potentially trade-offs that may work better for you, that you haven't considered or are still thinking about.

 

Let's take this example: Let's just say, since you're going to be getting $60,000 in support over five years, on top of your share of the marital assets, what would I be thinking if I am doing a coaching session with you, or if we're working more in-depth together? One of the first things I would think, and just on my mental checklist, is all right, you're going to be getting ... Let's just say you're the person receiving support. You're going to be getting about $100,000 in assets that you're splitting, because you have a $200,000 pot, so you're going to split that in half, roughly. It varies, but let's just say for simplicity sake, you're going to be getting about 100,000, plus you're going to be getting about $60,000 in spousal support over five years. In total, you're going to be getting $160,000 from the marital pot.

 

Well, when I think about that, I say, "Okay, well, what ... Do you want all of that now? Would you like to take all of that upfront, or do you not mind getting support over the five years?" One thing I might say, particularly if you don't want to be reliant upon your example-spouse, or if you need cash upfront to get yourself back on your feet, I might say, "Hey, you know, the $100,000 is pretty easy to split because it's mostly coming from a retirement account or something. That extra 60, well, what if we made it $50,000 instead of 60, because you're going to it all upfront, and we just took out extra, and maybe your spouse keeps the house and just cashes out some of equity to pay you off." That's an option that I just kind of made up off the top of my head.

 

But the point is, sometimes you need to think about, well, you know what, it's actually a better scenario if I get more money upfront and take that money now, rather than delay the divorce process some. Excuse me, not delay the divorce process, but take that money over time. And your spouse actually might give you less money for that effect, but it could be worth it to you. You're no longer waiting on those monthly payments to clear every month. Who knows what happens. And on top of that, maybe you get some spending money upfront, because you moved to a new place, or moved to a new town, or are in school for a little while, and that additional support upfront could be very useful to you.

 

Also, the converse is true in terms of thinking of your trade-offs. Let's stick to this example. For some of you, if you know you've never really created and stuck to a budget before, and you think you're going to blow through all of that money upfront, maybe it's wiser for you to take those payments monthly, that $1,000 a month each month for the next five years, because it will help you plan and budget better. Someone like me, I know myself well enough, oftentimes that would be a much better deal for me personally, because of the way that I think about money and spending, and cashflow, etc. Sometimes, it's more valuable to kind of have that stable payment coming, rather than if you're one who is potentially tempted by having a lot of money sitting around in a bank account. Then it's better off if you take those payments over time, and it might be worth it for you.

 

Now, conversely, if you're on the other side of things, and you're the spouse making these payments, it can be very important and very well worth considering, do you really want to write a check every month for the next however many months you're going to be paying support? Or maybe you can buy out all of that support upfront, or a large chunk of  that support upfront from your previous savings, be it retirement or from cashing out of a house, or otherwise, because that will give you the advantage of, maybe, having more flexibility later.

 

I'll give you an example. I have a friend of mine here in Texas who basically said, "Hey", to their spouse, "I'm going to give you 80% of the assets that we have, in exchange I'm not going to pay you any ongoing support." But this person, in particular, is an entrepreneur, and he knew he could made the money back, and so he did. He say, "Hey, you know what? It's worth it for me just to pay all my support obligations. Now, you'll be comfortable and you won't have any issues, and I'm not going to be writing that check every month. And then, I'll just have to find a way to re-earn and rebuild myself financially in that case."

 

If you're the one paying, it can also be a win for you to think about some of these trade-offs, because you can actually clean up your financial picture a lot by not having this ongoing monthly bill, or reducing that monthly support payment substantially over time, just by understanding some of your trade-offs. You have options and leeway in terms of thinking about, well, maybe a lump sum is better for all parties involved. Or maybe it's not. Or maybe a partial lump sum is better, where we front-load support a little bit; get more of it upfront and less later. Maybe there are other considerations where we structure a deal so that everyone ultimately is better off. You could have higher monthly payments for the first two years, and then a slightly lower the next two years, or something like that, so that everyone ends up in a better position possible.

 

When you're thinking about your finances, and your picture, and your divorce, and your settlement, I want you to look with a little bit more creativity, in terms of solutions. Understand, all right, well, here are all these numbers on a sheet of paper that you have. There're going to be assets and debts and everything else. What's the best way that we can come to an agreement using these assets? And what are some ways that I might not have thought about before, in terms of getting a benefit from these assets and things that we need to do? Something for you to think about.

And regardless of where you are in your divorce settlement process, if you haven't started, or you're in the middle of the process, what I want you to do is a little bit of homework. You have a picture in mind in terms of who's going to get what, and how those things are going to be split. Well, what I want you to do is come up with some alternate scenarios where, financially, everyone ends up just about the same, but you're getting a different set of assets and debts, and splitting it a different way. Come up with one or two or three more scenarios, or I can help you come up with those scenarios, as well, but different ways to think about your picture. Some of the best settlements that I've had the pleasure of working with, are literally that exercise, where you think you got to do things one way, but let's say, "Hey, let's split things a totally different way, and let's just see how that looks, and see if everyone is agreeable for it." There might be something to it that would satisfy everyone involved.

 

Just by, at least, doing the exercise, whether or not you ultimately stick to the path that you're on, or consider some other ones, you can often come up with some really useful solutions that you may not know existed. But, that's the nature of the divorce process. It's a complicated process. There's a lot of different moving parts, and sometimes you just need to use those moving parts and the complexity to your advantage to come up with something that's more creative than maybe you considered before, and actually it might be something that works better for everyone involved.

 

Nov 27, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

 

Thank you for listening! Find a transcript of this episode below.

 

A subject that's been coming up a lot recently in coaching calls is stock options, and many of you have them and you may not realize it, or you do know they exist, but you're trying to figure out what you should do with stock options. And stock options are actually a pretty complicated subject. They're one of the most complicated financial instruments even when the divorce process isn't involved. And when you add divorce on top of it, trying to decide what you do with the stock option, whether you keep them, split them, how do you negotiate for them? They're tough.

 

I remember when I was much younger, I still have on my bookshelf an old book about stock options and it is one of the hardest to read books that I've ever purchased because they are a very complicated subject. But because it's the podcast, I'm going to, of course, simplify it for you and try and make it as easy as possible. And I want to give you an overview of stock options, what to think about with them in the divorce context.

 

Some of you may have them and not realize you have them. Some of you might not have them at all, and which point this episode might just be some general education on stock options, or maybe you know someone who's a friend who has them. But I'm going to go through kind of what they are, how they work, why they're important. They're one of those assets in divorce that if you have them, they can be very, very valuable. In some cases, I've had cases were stock options are the most valuable asset in the divorce and other times, stock options can be worthless. They are a very fascinating subject in that regard.

 

But let's start with the basics. And by the way, in my book, Divorce And Your Money, The No Nonsense Guide, I have a short chapter on stock options that explains what these are and why you need to be thinking about them. What stock options are, I call them stock options or employee stock options, it's a form of compensation and basically, it gives you a right but not an obligation to buy a certain number of shares in a company, in the company that you work for usually, at a specified price.

 

Now, what does all of that mean? It basically means that stock options give an employee the benefit or give employees the opportunity or the ability to benefit when a company goes up in value. Stock options also give an incentive for an employee to stick around at a company rather than leave. And the way it does that is it says, "Hey, you get a certain percentage or you can buy shares of stock at a discounted," I won't call it a discounted price, but you can get stock in this company and appreciate in its growth.

 

And if you are or your spouse is an executive in a company, but don't have to be an executive, can be at many different levels, but most of my clients are generally executives or pretty high up in a company when they think about options. You can have these stock options there and it says you're a part owner in a company, basically. There's some specific mechanics to it that make them a little bit more complicated than just being a normal owner, but they basically give you ownership.

 

And if you're at a public company, in a company will usually have thousands of employees, it has a stock market ticker. You can look up the price for it. I know lots of people who have stock options at public companies. They're a very common form of compensation. Actually, even when I was working at my very first job out of college, I was working at JP Morgan and they gave stock options basically to everyone as a form of compensation and to keep you at the company longer. You get a big bonus of stock options.

 

And then if you work at a private company, and so this is the private company side is actually pretty complicated when it comes to stock options, but if you work at a private company like a tech startup. At the time of this recording, I'll give you an example of a big name. Uber is a tech startup that you've all heard of. Well, most of their employees have lots and lots of stock options that could be very, very valuable. They are a sign of ownership in the company and it's a big form of compensation for the company.

 

And so at the end of the year, or at a certain time during the year, a company might say, "We're gonna give you part of your bonus in cash and part of your bonus in stock," and those stock are usually in the form of options. Now, the reason options are tricky is because of something called vesting. I'm not going to get into all the mechanics of vesting because it's just so complicated and it really varies on a case by case basis. But just because you have these stock options doesn't mean you have ownership in the company yet. As I said, they're still called options.

 

And because of this term vesting, it's basically just says that you don't own, you don't get a full value of your options just because you have them. You might get your options awarded to you the longer you stay at a company. So if you got $100 worth of stock options, well maybe only $10 have value today, but if you stay at the company for five years, you earn the rest of that money and you get the full value of those options.

 

So the point is that, I know this is difficult to grasp, but stock options are a piece of ownership in a company. They have a vesting schedule, they call it, but they vest and so you earn that ownership usually the longer you stay at that company over time. And if you leave the company before your stock has vested, that stock becomes useless.

 

That's not a point we're going to get into for the sake of this episode, but oftentimes in negotiations, when you're thinking about stock options and what you should do with them, if you or your spouse or whomever is going to leave the company with unvested stock, then that will become useless to you. Something very important to think about as well.

 

So whenever you have stock options, you're going to need to know that they exist and also you're going to need to know their vesting schedule. Now, that's just some basics on the stock options. Now, the real question is, what happens in a divorce context? The real thing to understand in a divorce context is the way you treat stock options in divorce varies substantially on one factor.

 

And that is, if your spouse is working for a private company, a company that's not listed on a stock market, whose shares don't trade every day, then the way you approach stock options in divorce is very different than if your spouse works for a public company. If your spouse works for a company like Bank of America, or Walgreens, or Best Buy or Walmart, or any number of big companies, there's also tons of publicly traded companies you may have never heard of before, but you can go online, you can look up their stock symbol, and you'll see a specific price for the share.

 

If your spouse works for a publicly traded company, then stock options are much, much easier to deal with. If your spouse works for a private company, then the stock, or you I should say, then the stock options are much more complicated in terms of how to split them in the considerations you should be thinking about as you try and figure out what to do with them.

 

Now, I was going to start with a public company example. So when I worked at JP Morgan, they gave stock options a lot. And basically, you can go online and you can type in, you can go to Yahoo Finance or Google Finance. You can type in "JP Morgan stock price" and you can look up the exact value of what each stock option is worth. And so if I had 10 ... So as of the time I record this, JP Morgan stock is worth about $100. Very easy. It's good for our math.

 

Let's just say they gave me a 10 shares of stock as part of my bonus. They actually give much, much more than that, but let's just say they gave 10 shares of stock as part of my bonus and options. And so I have 10 shares of stock at a stock price of $100, which means I have $1,000 worth of stock options. Well, if you are trying to figure out what to do with those stock options, that is a pretty easy thing to figure out because one of the biggest challenges with any asset is trying to figure out what it's worth.

 

Well, with a publicly traded stock, you know what the stock price is, you know how many shares of stock you have, and you just do some basic math and you come up with a value. In my case, I've got 10 shares of stock at about $100 a share. So I've got $1,000 of stock that I would have to split. Not much fancier than that. The only thing that's complicated is usually the math isn't that easy, but it's not much harder than that.

 

Where the complication comes is if your spouse works for a private company, and I've actually had this discussion on calls quite a bit, is the difference between a private company and a public company. Just so that you know, is private companies aren't listed on a stock exchange like the New York Stock Exchange, or the American Stock Exchange, or the Nasdaq or whatever. And so the value of the company isn't traded every day. And if you want to ... You can't just look up how much the company is worth.

 

A public company has a share price and you can buy and sell the stock every day, but the good thing about a public company is you can always look up what the market value is at any given time. With a private company, it might just be a few people who own it, might just be the employees who own it, or might just be an investment firm that owns it, and they won't necessarily tell you the exact value. And so when you're dealing with private company stock, the considerations get much, much more complicated.

The reason is you don't know how much that stock is worth. The challenge with private company stock is valuing it. Private company stock, I'm not going to get into all the mechanics of it because it's way beyond what we could do and talk about in an episode that's useful to you, but one thing to consider, one thing that's weird about private company stock is it has no value until someone gives it a value. Now what does that mean?

 

Well, you can have private company stock. You can have 10,000 shares of private company stock that's worth one penny a share. So in theory, it's not worth that much, but what happens is with private companies, they might raise money from investors, in which case that penny a share that I talked about could become worth, all of a sudden, $2 a share instead of a penny a share. And so what was almost worthless before is now worth millions of dollars.

 

Or if that company gets bought, or if that company does any number of different transactions, those stock options, while initially on paper aren't worth anything, could become very valuable in the future. Private company stock is very weird in that regard. And when we think about it in a divorce context, it's one of the areas that causes a ton of complication because of this very issue. I had to work with a lot of attorneys on it, a lot of clients directly, and educate you that private company stock is a very complex area and thing to deal with and you have to be careful with it.

 

Let's just go through quickly what the difference is between private and public company stock in a divorce context and how you think about what you should do with it and try and come up with the best decision for you. If you have a public company stock or the company's traded, you can look up its value, you know the value. The value is clear. There's no real reason to split the stock and go through the complicated splitting process for stock options. It's usually not worth it.

 

Best thing to do is the person who has the stock keeps it. The person who doesn't have the stock gets credit for it, and you give up a little bit more of another asset to make up the value. But that's it. When it comes to ... It's simple. You treat the stock like a car. If you really want part of a publicly traded stock or you really wanted to split it, here's what I always say.

 

You can open up an e-Trade account, or a TD Ameritrade account, or a Schwab account or whatever and in five minutes, purchase that publicly traded stock. It's a very easy thing to purchase and there's no reason to add thousands of dollars of fees and complication trying to split publicly traded stock most of the time, or stock options most of the time. It's just not worth the effort. There's so many simpler ways to deal with it than splitting it.

 

When you're dealing with a private company stock, that is a very tricky area because we don't know what the value is. And so in general, most of the time when we're dealing with private company stock, you split it in half or you split it in whatever proportion you're splitting the assets. The reason is private company stocks value can fluctuate so quickly, so instantaneously that if you don't take your half the value, you could end up losing out quite a bit.

 

And there's definitely a lot of complications around it because it depends on how big the private company is and the mechanics of splitting the stock, et cetera, et cetera, but what the current value is of that stock. But many times, I see cases where the spouse who has stock options says, "Oh, these are worthless. We don't need to worry about the stock options. Let's just move on." And in theory, at the time they say that, they actually might be true, but the reason they have stock options is because they could have a lot of value later.

 

And so at this private company, it's a tech startup or whatever. I had a case like this this year where the person works at a tech company, the stock options aren't worth very much, but all of a sudden, a big investment firm in the middle of the divorce process, thankfully, comes in and says, "Hey, we're going to buy this company." And all of a sudden, those stock options which were worth a few thousand dollars at best, became worth hundreds and hundreds of thousands of dollars overnight and became a much bigger issue.

 

It sounds weird because it is, but that's also how stock options work, is oftentimes their value can fluctuate substantially, particularly with private companies where they're fast growth, valuing them as very, very difficult. And so the easiest way to get around that is by just splitting them evenly and therefore no one can lose out.

 

I'll give you another example, is if you are, say your spouse have stock options and the stock options are currently worth $1,000. Well you say, "Oh, I'm going to skip the stock options. I'm just going to get my share in the house and move on." Well, what if two years from now those stock options are worth a million dollars? How are you gonna feel about that? It's such a weird example, but that's how stock options can work.

 

Now also on the opposite side with stock options, this is something to consider, is they can also lose value. So you could say, "Actually, I want my share of those stock options," and it turns out the company goes bankrupt and they're worth nothing. So that's also a consideration as well. The point is there's a lot to think about if you have stock options. And if you're in the divorce process, you need to make sure you know that they exist and you really need to think through all of the different scenarios that could happen with these stock options so you can figure out, well, what is the best course of action for you later down the line with the options?

 

There's a lot of creative solutions that you can come up with for this very complicated asset. I hope I gave you a basic overview. It's not an intuitive subject and it's tough to explain and tough to explain clearly, but give you a basic overview of stock options. And if you have them, it's definitely an area, whether you have them or your spouse has them or you think you have them, it's definitely an area where you need to raise a red flag, make sure everyone has clear information as to exactly how they work, and from there, there's a lot to be thought about in terms of the divorce process, in terms of stock options and what the best strategy is for handling them.

 

It's an area that most attorneys, actually, I know aren't super well equipped to handle. Some are. There are definitely a handful of great attorneys out there who are super financially savvy who know the ins and outs of stock options better than me, but the average attorney off the street, certainly not. And actually, even many financial advisors, even good ones, don't know how to handle stock options well. And there's only a handful of people who really have good expertise in the stock option world.

 

If I were actually going to ... I'm going to leave you with a nugget. I love to give you resources and things to check out. One area or one person who's very, very good with stock options is a certified financial planner, a CFP. If you or your spouse have stock options and you're thinking about what to do with them in divorce, of course you can call me.

 

But there's also local certified financial planners who can help you think about the calculations, walk you through all the ins and outs of stock options in your specific scenario, and help you figure out, what are the best courses of action given this highly complicated, highly unusual asset that actually, a lot more of you have and you don't even realize that you have it or maybe you have an inclination that you have it but haven't really given thought to it in the divorce process.

 

So you can get a CFP, certified financial planner, contact me, or make sure you have an attorney who is very savvy in terms of the ins and outs of stock options because they are one of the most complicated areas for you to think about.

 

Nov 6, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

 

Thank you for listening! Find a transcript of this episode below.

 

In this episode I want to discuss refinancing the house in the divorce process and some considerations that you need to be thinking about as part of this process. Now, whether you're the person who's going to be keeping my house or if you're the person giving it up, there's going to be some information in here that is going to be helpful for you. Another thing I just want to mention right off the bat is if you go to the store and you get the quick start guide, I have 9 or 10 episodes dedicated just to considerations regarding your house in divorce and there's a lot of great information in there. It's a whole section in the quickstart guide and if you haven't checked that out, definitely go and get it because only some of the episodes are here available wherever you listen to podcasts. But the vast majority of them with a lot of great information a part of the quickstart guide.

 

Now, what we're talking about in this episode is house refinancing. It's a very common topic that comes up on coaching calls almost every day. And what we're talking about is basically transferring the name of the house from one person to another but there is a mortgage involved. I'd say 9 out of 10 times you have a mortgage on a house, some people in their houses outright, but most of the time there's some sort of outstanding mortgage balance. And the question is how do you actually get that mortgage out of one person's name and onto another. And so the house could be in both of your names, both you and your spouse's name and you want to put it in just one person's name afterwards or it could be in one spouse's name and they want to transfer the home and the mortgage to the other spouses of name.

 

And the reason I want to talk about this topic is there's a lot of considerations and things you need to be thinking about today and implementing today to make sure that you're thinking about your future and you're thinking about the refinancing process properly because there's a lot of common knowledge that I share on pod or on the coaching calls that people don't really know and so I want to bring that up for all of you who are listening. I'm going to use some examples to clarify what is important in this process and to give you some nuggets to think about. So I'm going to use the example of a husband and wife couple and the husband or the house I should say, is in both of your names. Both the husband and the wife's name's on the house and guess what? Both the husband and the wife are on the mortgage.

 

Let's say you have some young kids and so it's going to be better you think for one of you to keep the house. We're going to use the stereotypical example of the mom staying at home with the kids or at least wanting to keep the house with the kids and having primary custody. So the husband in this just sake of example, I deal with everything in between, but for the sake of this example we're going to assume the husband wants to transfer the house and the mortgage to the wife's name and how that process is supposed to happen. And actually it's not a simple process. I'm going to get into some further descriptions on the wife or the mom in this case because it's going to be relevant in terms of whether or not you can refinance.

 

What you do when you refinance a mortgage is you're basically getting a new loan out, paying off the old loan and then just the new loan remains in place. So I'm going to give you an example. I'll use some very simple math, keep it easy. Let's say you have $100,000 of a mortgage on your house and both of your names, well we're going to give it out. In this example we're giving the mortgage to the wife and so as the wife or soon to be ex wife and soon to be custodian with the kids, that person has to get a new mortgage and they are going to have to refinance and pay off the old mortgage and get the new one. And so with the new one, they are probably going to have to get a mortgage for about $105,000.

What I mean is there's going to be some fees and some expenses associated with getting the mortgage, but you have $100,000 outstanding. The wife is going to have to go to a mortgage lender and see if she can qualify and get a mortgage for $105,000. They'll take out $5,000 in fees and then what you're going to do is you're going to repay the mortgage with both your names on it. So it's going to be a zero balance. And then the wife is just going to have a mortgage in her name outstanding. Now, there's a lot to cover in that relatively straightforward example. So I want to dig into some details and some things that you should be thinking about if this is going to be an element of your divorce process.

First and most importantly, and this is where almost everyone goes wrong that I talk to and doesn't think about, is if you're planning on refinancing a mortgage and just putting one person's name on that mortgage, that person needs to be able to qualify mortgage on their own. It means that person needs to have enough credit and enough income to qualify and fully pay off that new mortgage. Many people do not have this point. If you are trying to take the house yourself, you're going to need to refinance and get a mortgage in your name or if you're trying to give it to your spouse, you're going need to refinance and get a mortgage in your name. Often times the spouse who wants the house will not qualify for it because you not only need good credit, but also you will need income to prove that you can repay those funds.

 

So if you are a stay at home parent and have not had income and your only income is going to be potentially some form of spousal support, you may not qualify for refinancing the house or if your spouse has bad credit and they're about to take over the house, they may not qualify to refinance the mortgage in their name only. And if you are a bank you want to be certain that the person who's going to be taking this refinancing loan out can actually pay for it. Look at the time, well, you are married and both people's names are on the house. If you stop paying, the bank has the option and will not just the option, they will pursue both of you aggressively until they get their money back and there's two people that they can pursue and two people's assets and income and everything else that they can over.

 

Now, if you're making it just one person, well the risk to the bank is much higher because now there's only one person whose assets and income they can go over and try and take and so they're going to want to make sure that if that one person is only on the hook that that one person can repay for things. But if you don't, if you're a stay at home parent and you don't necessarily have a clear source of income for the foreseeable future of your refinancing time, then it is very likely that you won't be able to refinance the home and therefore won't be able to take your spouse's name off the home and therefore either going to have to sell the home or figure out another arrangement. There's a lot of risks to that and a lot of things you need to think about and conversely if you're on the other side of it.

 

Let's talk about the other side because I work with a wide variety of people in a wide variety of situations. Let's say you are the person who wants to take their name off the house and so your spouse is the one who's going to have to qualify for the mortgage. Well, there are some issues with that because if your spouse is unable to qualify for a house refinancing, you are putting yourself in a world of risk and potential liability if you leave your name on the house and the mortgage. And so here's what I'm getting at. Let's just say you come up with some great divorce settlement, you think you're pretty good and as part of the divorce settlement you write in my now ex spouse is going to be responsible for any future mortgage payments on the house, but we're not going to refinance it we'll leave it as is and keep both of our names on it.

 

Well, let's just say three years down the line something happens and your spouse misses a mortgage payment and then maybe starts missing two mortgage payments or three. All of a sudden you're going to be getting calls about mortgage payments being behind, your credit's going to fall substantially and you're going to put yourself into a lot of risk and liability for this outstanding mortgage that you should have refinanced or at least gotten rid of one way or another down the line later. And so there are some things for you to think about. I almost never encourage people to leave their names on the house if they're not living in it after divorce because it just presents too much risk down the line. But oftentimes you have to make sure your spouse can qualify for a that refinancing.

 

Now, I've talked a lot about some of the circumstances and situations and considerations as you think about refinancing your mortgage in divorce. The good news is now that you have a little bit of a handle on it, there's an easy solution to this whole thing that all of you, if this is going to be a question in your divorce, either you or your soon to be ex spouse needs to do this sooner over later. It's not hard. You contact a mortgage broker or a mortgage lender and you see if you will qualify for refinancing or you could say prequalify for a refinancing. You can't actually do this process in most cases until the divorce is signed. But you can find out if this process is actually feasible for you before that. And what do I mean? You do this, you contact a loan company. I don't endorse this company. I don't know much about them, but they advertise a lot so Quicken Loans.

 

Quicken Loans I see their ads all the time. You can contact Quicken Loans and say, "Hey, here's the situation. I'm about to get divorced. I want to make sure I can qualify to refinance for refinance my mortgage and put the house in my name as part of this process." They do this thousands of times a day with tens of thousands of people, they're very used to this conversation. You can go to them and they'll ask you for your information, your income, etc. And they'll say, "Hey, you can be approved up to X amount of mortgage." And so you can take that amount to them and they might say, "All is good. Yeah, I think this will work out for you. You're looking good." Or they'll say, "Actually, you don't meet the qualifications at all for what we require and this probably won't work out for you." And you have to go back to the drawing board or you go to the company that originally did your mortgage and contact them.

 

Whoever you want to contact, it takes an hour or two or whatever, but you apply and just say it's for preapproval to see if you can do this thing. You don't have to take it, there's usually no fee just to preapprove yourself. It's an hour or two of your time, very straightforward and if you meet the information they'll send you a document that says, "Yeah, you prequalify for this refinancing. Here's all the terms, here's the fees, everything laid out." It's usually on a couple pages and you're good to go and you know what your options are, whether or not you pursue it or not. Or if you go and you find out and you say, "Hey sorry, given the house, given your credit, given your income, given whatever their issue may be, you don't qualify for this refinancing." Well now you know your options in terms of the divorce process or if it's your spouse who's the one who needs to go through this process.

 

I would say, "Hey spouse, look, I'm happy to give you the house, but you need to just make sure that we can actually refinance it. Just go call this company or call one of these three companies to make sure that this process is doable." And so there are things to consider and you just go and get an answer. If the answer is yeah, you could refinance this mortgage, then you know the answer. If the answer is no, you can't refinance this mortgage, then you know that answer too and you can make an appropriate decision in terms of all of the other issues in your divorce process and really come up with a divorce settlement. The worst thing that I see, and I see this happen many times down the line, is when you have an idea in your head or you're deep in the negotiating process and you book a coaching call or whatever else and you say, "Hey, here's what we're going to do. Here's what we're thinking about. How does this sound?"

 

And I'll say, "Hey, this whole transferring the house and refinancing isn't as simple as it sounds. Have you been pre qualified yet? Have you contacted a mortgage broker?" And you'll say, "No." We'll say, "Hey, why don't you just take the next two days, I'm going to give you some homework, go contact a mortgage lender and see if this is actually feasible." And many times you are very surprised with the answer or what is required and you have to really adjust what you're thinking about. Now, it's not all bad news either. Maybe you find out that everything's on target and you're okay and you have the definitive answer and you're good. But the sooner that you can figure out and contact someone about a refinancing the better. The other thing I want to just toss out there is there are also other creative solutions when it comes to refinancing a house.

 

I've worked with some people where we can partially pay down the mortgage with retirement funds as part of this process and refinance a chunk of the mortgage and if you do a chunk of it, you're in good shape and can refinance or can come up with a creative solution. It really just depends on individual circumstances. One of the reasons I do this podcast is this stuff is complicated and oftentimes there's many different ways at looking at things and that's some of the things we get on coaching calls or with the people I work with on a longer term. But you could come up with some pretty interesting solutions down the line for things that you might not have thought about when it comes to the mortgage. And so the other thing when it comes to a refinancing, and as I said you should really contact some mortgage firms or some banks that provide mortgages and explain the situation.

I promise you all of them have dealt with hundreds or thousands of divorces each year and are very familiar with the circumstances involved in the moving part of the process. There's nothing scary about it, it's just taking the time to do it. But you could be in a position where, well, let's just say using $100,000 mortgage that we were talking about before, they could say, "Hey, given your part time work and your income and whatever else, maybe you can only refinance $40,000 of that mortgage." Well maybe that's sufficient because if you have $60,000 on other assets, you might be able to pay off with using a retirement plan or something else. There are ways to structure it so it's tax advantageous if you know the laws and work with an accountant or work with me or whatever else, the ways to structure a creative solution so that, all right, well we're going to take $60,000 from this retirement account.

 

We're going to refinance for $40,000 and that way we're going to get rid of this mortgage, you're only going to have a $40,000 mortgage outstanding. Everyone's going to be happy, no weird liability, etc. We've done that time to time with people as well because that's just the solution that makes sense. It's really about and this podcast is about and what I'm here to help you with is understanding your options, understanding the complexity involved, understanding that some of these decisions even though conceptually they're pretty basic, refinancing a mortgage actually in practice, they have a lot more complications to them that you don't often think about. And I want you to be informed and really understand, hey, I need to think about this decision further and really make sure that whatever my spouse and I decide is really the appropriate financial decision and feasible financial decision for both of us and puts us in the best position possible.

 

And making sure that you're not forgetting anything that is a very important as part of this process. And refinancing the house in theory very simple, in practice very complicated. And it's been coming up every week on calls and so I want to make sure you're all informed as to how much there is to such a very, in theory, simple decision.

 

 

Oct 26, 2018

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Thank you for listening! Find a transcript of this episode below.

Most of the information on this podcast is focused on leveling the playing field in divorce and making sure that if you aren't the person who was in control of the finances, that you make sure that you're able to get the information you need so you can create and structure a reasonable settlement for the rest of your life and ultimately, to put it bluntly, so you don't get screwed, as they say, in the divorce process. As part of that, and part of the coaching calls that I do every week, one of the recurring themes is that many times you don't have access to essentially information that you'll need so that you can make an informed decision about your financial picture and what the best things are for you to do.

 

One of the things I want to discuss in this episode is a few ways to get the appropriate financial information in your divorce and make sure that you have a clear and full financial picture. This could be for many reasons and many situations this comes up. Sometimes your spouse is deliberately hiding assets and hiding money from you or misstating your financial picture. That's a very common one., sometimes in a small way, sometimes in a big way. Sometimes it could be the case that your spouse made a mistake and forgot about something. Or maybe you have a complicated financial picture and there are just a lot of different moving parts that you have to keep track of. Or maybe you just didn't really even know what existed and you're just trying to get a sense of what actually do I have. You're just trying to figure out the whole thing and get some information.

 

What I want to do in this episode is go through some specific tactics to help you get a clearer financial picture of what you have and what you need so that you, and your attorney, and perhaps me if I'm working with you, you can make those informed financial decisions or at least the things in this episode, I want to help you start to figure out where to look so that you can start digging and start getting on the right path financially. I'm going to go through five tips, tools, tricks, whatever you want to call them, in order to help you get financial information in your divorce if you don't have direct access to it otherwise. Five things. The first one is ask. Second is check your tax return. The third is use your memory or any clues that you may have. The fourth is a subpoena. Finally, the last one is using a forensic accountant. The forensic accountant is going to be last because it's a combination of many of these things.

 

Let's jump in and go through these tactics. The first one, as I said, is you just need to ask. Sometimes if you ask the question, "Hey, can you provide the latest account statements for this retirement account, or this mortgage, or this whatever?" either through your attorney or in writing in some manner, your spouse will do so. I always encourage people to ask in writing with any specifics you may have because it's good to have a record of times if your spouse doesn't comply. It's nice to have a record of all of the times you've asked and all of the times they have not provided full and complete information because that will look bad to them later on. You always start with an ask. Asking is easy, but it doesn't mean you're going to get a response. We're going to go through the other areas and eventually some of the ones that will mandate that they provide a response.

 

The second thing is related to getting your access to your tax returns. One of the very common things I hear actually usually multiple times a week is that your spouse or that a spouse basically forged a signature on a tax return, and you're unsure if the information in the tax return is correct, if you have some additional liability you might not know about, if the taxes are reported correctly. You never signed them yourself. You don't really know what's in there, and you're worried about the contents of the tax report. The other thing that's relevant about a tax report is that assuming that everything is in order on those tax forms that you file, tax reports are one of the most useful areas to get a sense of what assets that you have. Here's what I mean. If there is a bank account somewhere that you might not know about, let's just say at Bank of America because it's the largest bank, I think, in the US, and if there's a bank account that you don't know about and it earns a dollar in interest over the course of a year, guess what? That bank account and that dollar of interest should show up on the tax forms. If it does not, there are some bigger issues. Oftentimes you will find a lot of assets you don't know about if you're used to knowing what you're looking for on a tax return.

 

Here's the challenge, of course. We're talking about getting access to information. The challenge is that how do you get your tax reports if you don't sign them, if you don't have a copy of them, your signature was forged, you don't have them handy laying around, and your spouse isn't being forthcoming about them? Actually, it's pretty easy. If you go to the IRS website, they have something called Get a Tax Transcript. If you type in get your tax transcript or transcript from the IRS on Google search or online, the IRS website will pop up, and they have a form you can provide to get a copy of your transcript and your taxes. You can get, I think, three to five years worth of your tax returns. They will provide either an electronic copy or a physical copy in the mail of those tax returns. Of course, you have to fill out some information to get those tax returns, but the point is if your name was signed on a joint tax return, it's a record that you can get from the IRS as a government service. It's free, and you can get copies of your tax returns by requesting that transcript.

 

The other thing that you can do is IRS offices are everywhere across the country. I've had many people do this. You can go to your IRS office, identify yourself, and request copies of the tax transcript. They will provide those for you if you go into the office and ask them in person. This is one of the most important ways. I think I say it on every call where someone asks, "Well, where do I get this information? I think I don't have a full picture of our accounts." I always say, any forensic accountant, any lawyer will ask this question as well, is start with the tax returns. From there you will be able to have a lot of clues that show up in a myriad of ways on the tax returns.

 

I could talk about this point for a while. Even with my personal taxes, I filed my taxes. Because I've traveled quite a bit and I have a few different addresses, I missed a document. I didn't sent it to my accountant, and I filed my taxes, and the IRS rejected them. I was like, "Oh, well what's going on?" They said, "Well, you're missing this form." What happened is I had to add in this form. I went and dug it out, and I added in this form. Then I resubmit my tax. The point being is all of these items that you might be looking for, these accounts, these interest retirement accounts, contributions, other investments, whatever, will show up or should show up on your tax form somewhere, particularly if you're looking for outside assets or outside investments that you don't know about. If they don't show up on your tax form, then it might not be there or your spouse is substantially cheating on their taxes, in which you have a lot of other considerations to think about. But let's move on.

 

You can get copies of your tax transcript. That's important. The third thing on my list is use your memory. If you have any inclination of accounts you may have had, be it investments, be it real estate, be it a bank account statement, be it something you remember coming in the mail, it could've been a credit card, it could've been anything, any account firm that you've seen, or have a clue about, or have thought of, try and jot down as much information about those things as you can because ultimately you might actually find a way to get access to that information and use those clues or breadcrumbs just from memory. Oftentimes you know more than you think you will. Then you're going to be able to use that information to help your attorney, me, your accountant to know where to look, and know who to ask, and where to start digging. Anything you can dig up by memory, or if you remember an email, or an account, or whatever, make a list of those and collect just as much information about them as you can because they're going to be useful for the next point, which is point number four.

 

This is the big one. This is the subpoena. I'm sure if you've ever watched a television show that talks about legal stuff, you've heard the term subpoena. Subpoena is a very important word and legal time. Basically it is a legal document that says that the person receiving it or company receiving it needs to act in a specific way or provide specific information. I'll give you an example of what this is. Let's return to Bank of America. Let's just say, "Hey, I remember some sort of account from Bank of America that we had for a few years. I don't have the account number of information on it, and my spouse isn't providing the information willingly." You can say or your attorney can say, "All right, well we're going to issue a subpoena to Bank of America to provide all of the records related to an account with this person's name on it." Bank of America will be legally obligated to provide that information to you. It's not always mandatory, but it's 99% of the time mandatory. You can fight a subpoena, but that only happens in very rare circumstances.

 

I have a case now where there is a real estate under question. One of the ways we got some information from them is we had to subpoena the building management company and everyone who was connected to this real estate. They were legally required to provide certain records about who owns it, what percentages, what financial information there was about this building. They provided that information, and now we have it and can make much better decisions during the divorce process. If you don't reply or your spouse doesn't reply to the subpoena, subpoenas come with a wide variety of potential punishments as part of the case. It can include fines, jail time, and many other things depending upon your state and what's going on. Subpoenas are a great way to force or require access to information.

 

The reason I put subpoena fourth on this list, and this list is in a particular order for a reason, is if you've asked about some accounts and maybe you get some information, you look at your tax returns and you get a little bit more information, you use your memory and you get some more information, with all of those clues if you're starting to put together this puzzle, it's big pizzle and you're starting to put it together piece by piece, ultimately a subpoena is that tool that attorneys can use to force you to get a much larger section or pieces of that puzzle, particularly when you know where to look. If you don't know where to look, your attorney can't subpoena, I guess he or she in theory could, Every bank in town or every financial institution in the country, we're talking about tens of thousands, if not hundreds of thousands of different places.

 

What you need to do is be able to say, "Hey, I have this breadcrumb that I saw on my tax return on page eight. I have this breadcrumb from my memory that we had an account here at one point. I have this breadcrumb from whatever else that I think we need to follow up on, and there's more to the story here." Let's take that information and leverage a subpoena to see if we can get some more information out of it and get a more complete picture of those things.

 

Then the last thing on the list after subpoena is a forensic accountant. I have episodes on the podcast with forensic accountants. I have a large series in the store in the Quick Start Guide, as it's called, with information about finding hidden assets and how to use a forensic accountant. A forensic accountant is one who is an accountant whose expertise is taking all of these breadcrumbs and putting together a coherent financial picture. A forensic accountant can look at page 17, or I'll use an example. I have some clients with tax returns that are 180 pages because there's lots of supporting documentation. They have complicated financial pictures. A forensic accountant can take a 180-page tax return and look on page 79, line 16 and say, "Hey, there is something to this account. We need to do a lot more digging. Let's track down more information about it. Here's what I know from this account, and it's probably a big one."

 

A forensic accountant is specialized in doing those types of analysis and basically taking all of these breadcrumbs and putting together a clear and coherent picture to the best of their ability to help you track down all of these assets that may be missing, hidden, or some other way financially questionable in terms of things that are going on. It's a very specific niche of accounting that requires a good deal of expertise. It's not cheap, so one of the things I always say before hiring a forensic accountant is, "How much money do you think is realistically missing?" because I've seen forensic accountant bills go up into the tens of thousands of dollars easily, particularly when there's a lot of complication and it's hard to get things. If you have hundreds of thousands of dollars or millions of dollars at stake, then oftentimes it is well worth the investment. Think of all these things as an investment. If you have to invest some money to get a lot more money, then it can be worth it. A forensic accountant will ask for all of these tax returns, all of the things that you remember from memory, things from a subpoena. They might help your attorney craft an appropriate one. All of these things a forensic accountant, a good one, will ultimately put together a comprehensive picture for you when it comes to finding that money or assets that are missing.

 

The thing about this process, and I want to step back for a little bit, if assets are hidden, it's not a guarantee that you're going to find them. Even if you do find them, it's not a guarantee that you are entitled to those assets. It can be a complicated process, and there can be a lot more to it. But you do need to oftentimes know that these assets exist. The good thing I will say in the modern world, unless your spouse was a drug dealer or had a cash business, you can find a trace of assets everywhere from an email, from a wire transfer, from a public document, from whatever. There is a transaction record of everything. The question is how much it's going to cost you to get access to it, and is it really worth it for you. If your spouse is being forthcoming, and you think they're being forthcoming, and everything seems to make sense, you won't have to go down this path of getting a forensic accountant, and issuing subpoenas, and everything else. This process takes a very long time to put together, sometimes years, when it comes to all of these things. You have to really wonder and think about what the right decision is for you.

 

But if your spouse is not being forthcoming and there are a lot of things, and questions, and concerns that you have, I know because I talk to you every day on coaching calls, you ask me these things. Sometimes I'll talk to you and say, "Hey, that sounds a little suspicious. I think there's more to it. Let's dig in further." I say this as well. I try and be as honest and frank with you as I can. I'll say, "Look, from what you're telling me, I understand that some stuff is missing or this sounds a little bit questionable, but I don't know if it's worth it emotionally, financially, time-wise and everything else to drag on this process given what else you've told me to date. Maybe it's not the best idea to pursue this path." Whatever the case is, you have to think about what's right for you. I just want to give you the tools and the information so that you can think about these things and ultimately make the appropriate decision.

 

Just to summarize quickly again how to get access to information, I talked about five things. The first is you ask. Second is get copies of your tax return, and specifically your tax transcript. The third is use your memory. You probably know a lot more than you give yourself credit for. Fourth is a subpoena, which is issued by an attorney. You can ask your attorney about that and if it's appropriate for you. Then finally is employing the services of a forensic accountant. For many people, that may be an essential item. I've seen some great work from a forensic accountant that's just unbelievable, particularly where there is a lot of money and financial complications. Forensic accountants can be the essential part of this divorce process.

 

Oct 16, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

 

Thank you for listening! Find a transcript of this episode below.

 

In this episode I want to discuss mediation. It's a topic that I haven't talked about in a little while, and mediation is very important for many of you. You end up hearing your attorney talking about mediation, or you end up going for it, or you're preparing for mediation, or you've just heard about it and you want to know what it is, what it's like, and whether it's right for you.

 

One thing I will toss out there is, mediation for many of you can be a very useful way to resolve many of the issues in your divorce. I want to go through a little bit about how it works, and why it exists, and provide some information in terms of whether mediation is something that you should consider during your divorce process.

 

Now, the reason people pick mediation, or even consider this mediation process is, it's one of the tools, not the only tool. But, it's one of the tools, and one of the most common tools people have to avoid going to court. Anything you can do to avoid going to court, and avoid going to trial, is generally speaking beneficial for you. The goal is, in the divorce process. I mean, aside from getting out of this process as quickly, efficiently, and in a best position possible for you and your family. The goal of this process is not to end up in front of a judge.

 

Now, for some of you, it's inevitable. I deal with a lot of cases, probably a higher percentage than most end up going in front of a judge just because the issues that you're dealing with are so contentious that, and you can't come to a satisfactory resolution. But, for those who can, you don't want ... You want to use, or at least consider mediation as one of your options.

 

I've talked about judges and courts before on the podcast, and just the one thing I'll say about it is, imagine a stranger who knows nothing about you, making in just a few minutes, the decisions that'll affect you, your assets, your kids, your support, for the rest of your life. They determine that as just a stranger. They're in charge of making some pivotal, life decisions. They don't know you, they don't necessarily care about you. You're one of hundreds or thousands of people they have to decide upon each year, and they don't spend a lot of time with you, and they're not really getting to know you. Is that how you want your divorce to be decided? That's why people don't want to go to court, and mediation is a very useful process for some of you.

 

Now, how does mediation work, what is it like? What is it? Well, mediation is basically the process where you, your spouse, and a neutral third party, usually a neutral attorney, or retired judge, or professional mediator. Helps you work through the issues in your divorce, and helps you come to a point where you can find middle ground, or some sort of reasonable compromise on the key things that you're thinking about, and trying to decide in your divorce.

 

What do I mean? Well, there are several things that we could consider and think about. You have issues in your divorce. Some things might be very clear, right? I'll just use a very simple example I see all the time. You and your spouse both probably have separate cars. In most of the cases, nine times out of 10, it's not really a dispute over who gets what car. If you drive a truck, I don't know why I said truck, I don't. But, if you drive a truck and your spouse drives the Toyota, the Toyota Corolla car. Well, you probably will keep the truck, your spouse will probably keep the car, and we move on. Nine times out of 10, or probably 99 out of 100 times, that's not going to be a contentious issue.

 

But, something that might be an issue is, how much of that retirement account are you really entitled to, or is your spouse really entitled to? What's the appropriate amount of support to consider? How much parenting time, and how should we work out some of the custody issues? Or, whatever other issue or consideration you may have on the table, mediation could be a way, a place, a format for you to resolve those issues. As I said, there is a neutral third person in the mediation. At a minimum level it's you, your spouse, and that neutral person talking it out.

Perhaps in a conference room, or in someone's office, to figure out these discussions.

 

But, alternatively, there are more ways to ... More formats to mediation. You could both have attorney's to help you during the mediation process. That would mean five people involved. You, your attorney, your spouse, your spouses attorney, and the mediator. Or, you could ... There's different options. Sometimes mediation takes place in the same room, where you book a half a day, a full day, several days, even a week to sit and negotiate the issues around the table.

 

Now, for some of you, being in the same room with your spouse probably is not going to be the most productive way to reach a resolution, so they have options for mediation where you're in separate conference rooms. What happens is you and your attorney, or you by yourself, are in one conference room. Your spouse and your spouses attorney are in a separate, or in another conference room. During that process your spouse ... Or so, the mediator might come into your room first. The mediator will come in and say, "Hey, what do you care about, what do we need to work through?" Let's say you go through your top three issues. Your mediators say, "Hey, you know what? I think on this point number two, you're not being totally realistic. You need to have a little bit of leeway here. Can you give up something?"

 

You'll listen, you'll say, "I don't know if I want to do that." The point being is you'll come up with some sort of resolution and move on. Then the mediator will say, "Okay, I'm going to go to your spouses room and let's see if we can bring these issues closer." The mediator will leave, go to your spouses room, and the spouse will ... Will say, "Hey, what's important to you? Can we work towards these kind of things?" Then the mediator will kind of go through and they'll say, "Oh, you know, you're doing well here. You might have to give up some more," whatever else. Then they might come back to your room. Or, if you're doing it all live or in the same room, whatever the case may be.

 

Then, the other thing to think about too with the mediators is, so their goal is as a mediator, to get you to a resolution. That is the whole point of mediation. Sometimes even the court mandates that you have to go to mediation before going to trial. The goal is to resolve as much as you can, as soon as you can, without going to court. The mediator also, if you have a good mediator. As I said, they're often a retired judge, an attorney, or a professional mediator. Part of the things they will do aside from being very good negotiators, and helping you come to a resolution, is that they will also make sure that you're doing within the bounds, understanding what's in the bounds of the law.

I've heard a mediator say, "Hey, that issue that you're thinking about." Be it, let's just say you're asking for a particular amount of support. The mediator might say, "Look, I've been a judge for the last 20 years, and now I'm a mediator. The courts in your county won't give you that much support, so you need to lower your expectations, and lower that amount. Let's go to something that's reasonable, within the bounds of the law."

 

Or, that judge might say, or that mediator might say, "Hey, I don't think you're asking for enough here. I think it's reasonable for you to ask for more." Something like that. Just, the overall point of this is to say is, the mediator is there. They're not there to be your friend, they're not there to favor one spouse or the other. They are there just to help you negotiate, work through thorny issues, and get to a place that's often times much more productive than just your two attorney's, or just you and your spouse going at it from opposite angles. Their goal is to get you to that agreement.

 

I hope that provides a good general overview of the mediation process. Some other things I want you to consider, is there are some benefits to mediation. One very clear benefit, is that you get to avoid court. I already discussed that. The second is that, it's a less expensive process in general. Now, what do I mean by that? Well, court by itself is all consuming on your part, your attorney's part, and everything else. That's already on top of the normal divorce process. It just adds an extra layer of very intense complication to everything.

 

Mediation is, if you're preparing for court and you're paying your attorney, that's the times when I see legal bills go into the 50, 100, 150 $500,000 mark, even when you don't have that much in assets. I've seen some astronomical legal bills, and almost all the time it's because of court. The only other time is if your finances are really, really complicated. But, most of the time it is because you are going to trial. It is such a high stakes event for everyone involved, the legal bills are expensive.

 

Now, mediation is a way to avoid that. Now, I'm not going to say that mediation is cheap. It is not. Mediation, a day of mediation can cost $3,000 a person often times, or more. That's on the low end. If I were called into the mediation and you wanted a day of my time, it would be several thousands dollars. It's not cheap. But, it is a way to break through, and often not only get through these issues faster, but also much cheaper than if you had gone through every issue back and forth with your attorney over months, and lots of letters, and lots of phone calls, and lots of arguments. Mediation can be very effective in that category. It's a very efficient way to come to a resolution.

 

Then there's the third thing for mediation. Now, if you and your spouse are on reasonable terms, I strongly recommend mediation instead of fighting it out through your attorney's. Mediation can be a very inexpensive way for some of you to resolve just one or ... If you have just one or two issues, or that you're thinking about that you just kind of need to have a third person chime in. Or, if you and your spouse are just generally civil, and you think you can kind of work it out pretty reasonably. Then, mediation could be a very exceptional process for you, and a good way to resolve things without a third party interfering, and over complicating the process.

Now, that's just a basic overview of mediation. If you get the quick start guide in the store, or work with me on the coaching calls, we have a lot of information about how do you prepare for a mediation? How do you think about negotiating? How do you really make sure that your wishes are clear, and you're coming up with some creative solutions? The nice thing about mediation is that you have a lot of options that you can, flexible options that you can work through and use. Mediation is an effective way to pursue some things you might not have thought about, that get you into the position that you always wanted all along, and everyone is as happy as they can be given that you're talking about divorce.

 

I would encourage you to check out some of those episodes, and some of the ways to prepare. Also, for a lot of you, you call me and say, "Hey, I got mediation in a month." Or, "I've got mediation in a couple weeks." Or, "Mediation in three months down the line. How do we prepare for this, and how do we put some information together so that you walk into the room, the mediation room ..." 'Cause remember, this might be a half a day, a day, a week at the most for most of you. How do you really prepare for that, really get clear on your goals, the things you want, and acceptable bans? When I say bans I should say, acceptable proposals that will really work for you.

 

Some other things to consider. Then the last thing I forgot to bring up is that, mediation isn't always a binding process. Sometimes it is, sometimes it is not. Often times you can, and most of the time you can go into a mediation voluntarily and you say, "Hey, we're going to work really hard to get to this agreement. But, if it does not happen, then we're not forced to sign anything that you don't want to sign." Often times it's very good, and I encourage most of you, even if you do come to a pretty good solution in the mediation room, to take a day, or two, or three just to think about it.

 

Just from experience, going through mediation can produce a lot of adrenaline. You can feel very wired on mediation day. Often times there's emotions, there's a lot. There's just an extraordinary amount of feelings, and moving parts, and it can often feel overwhelming. I hate to use the word exhilarating, but almost in a way. There's a lot going on. Sometimes after that's over, you might need a night of sleep, or two, or three before you sign that final agreement, unless you're just getting everything that you want in the room.

 

Mediation has a lot of dynamics to it, but I do and want you to, if you have the ability to, consider using it as a process as you consider your divorce. And, the options that might be best for you, whether you're still preparing for the process, in the middle of it, or are trying to work out some of the issues. Often times, mediation can be a great route to go.

 

Oct 3, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

Thank you for listening! Find a transcript of this episode below.

In this episode, we're going to discuss how to divorce a narcissist and when, or I should say at least survive the divorce process, and really come in in one piece, and come through this situation in the best position possible given a particularly difficult spouse to handle during the divorce process.

 

The reason I bring this topic up, I haven't talked about it in a while, and through the coaching calls I've had over the past few weeks, many of you are identifying that your spouses have some form of pretty severe or extreme narcissism, and are wondering, and have been asking, "Well, how do I deal with that, and what kind of strategies can I employ? What are some things that I should be thinking about?"

 

I'll say of course individual circumstances always matter, and if you want to talk about your case, we can do that via a coaching call, but I also want to give you some general tips and strategies and things to think about, and also for those who haven't really thought about narcissism with any depth and thinking about that in the context of your spouse, I want to go through some of the characteristics of what someone with narcissistic personality disorder, or what a narcissist is, and then also go through really just three very specific strategies to help you get through that situation.

 

Let's first start with what a narcissist is. The technical term, you heard me mention it earlier, is narcissistic personality disorder. It is a disorder, and it does have a clinical and psychological definition that's very specific, and I'm going to actually read off some of the symptoms of that.

One of the things I do want to bring up though, is it's a continuum, so what that means is some people would score, if I wanted to keep the language simple, some people might score 100 out of 100, as they are an extreme narcissist, but some of us, including some of us listening, still have forms of narcissism, we all do, but we might be a five, or we might be a 10, or might be a 20, but your spouse could be an 80, or a 90, or 100, or I bet some of you think your spouse might be off the charts.

 

What I'm going to do, is I'm going to read the definition of some of the symptoms. These come from the Mayo Clinic website, and it says that, "People with narcissistic disorder can have some of the following," and I know some of you are going to be nodding your heads as you listen to these descriptions, so here we go.

 

So people with the disorder can have an exaggerated sense of self-importance, have a sense of entitlement and require constant, excessive admiration, expect to be recognized as superior without achievements that warrant it, exaggerate their achievements and talents, be preoccupied with fantasies about success, power, brilliance, beauty, or the perfect mate, believe they are superior, and only can associate with equally special people, monopolize conversations and belittle or look down on people they perceive as inferior, expect special favors and unquestioning compliance with their expectations, take advantage of others to get what they want, have an inability or unwillingness to recognize the needs and feelings of others, be envious of others, and believe others envy them, have an arrogant, or I should behave, in an arrogant or haughty manner, coming across as conceited, boastful, and pretentious, insist on having the best of everything.

 

That is the first set of characteristics. Believe it or not there are more, but I know just from that reading, some of you have a pretty clear sense and probably know where those behaviors come in with your spouse. Maybe it's not your spouse, and that wouldn't be relevant to the divorce context, but I know we all have friends or might know some people in popular culture who you can clearly identify these characteristics with. I will not name any names, but I think it's pretty obvious for some.

 

Now, the definition from the Mayo Clinic also has some other characteristics they say, and it says, "People with narcissistic personality disorder have trouble handling anything they perceive as criticism," that's very important, "and they can become inpatient or angry when they don't receive special treatment."

 

Now, I'm just going to give you all a little insight into me. That one definitely falls in my category. I do love special treatment, and that one's me. But anyways, other things is that they have significant interpersonal problems and feel slighted, react with rage or contempt and try to belittle the other person or make themselves appear superior, have difficultly regulating emotions and behavior, experience major problems dealing with stress and adapting to change, feel depressed and moody because they feel short of perfection, and have secret feelings of insecurity, shame, vulnerability, or humiliation.

 

That's a lot. That is a ton of different things, but in conversations I have with you every day, I know a lot of you are living with spouses that share these characteristics. These are daily behaviors that you are living with, and you're trying to figure out how this process is going. One of the extra challenges with someone who shares these narcissistic characteristics is that most narcissists don't think that anything is wrong with them.

 

One of the challenges with diagnosing narcissistic personality disorder is someone who is a narcissist will not sit down to be diagnosed, and they won't think that anything is wrong. In the divorce process in particular, which is what we're talking about, it really drags on the divorce process, because everything becomes bigger than it needs to be.

 

Now, while I'm not saying that the issues that you're facing in divorce are small, they are big, but what happens is usually you, the person who are listening, has pretty reasonable expectations, and needs, and wants during this process, whereas dealing with the narcissist can be just complicated, and their expectations are the opposite of unreasonable. Every time you force them to give an inch or ask that they give an inch, they react in ... they overreact, I should say, kind of in an out of control manner, and it just becomes a much bigger fight than necessary.

Compounding that is I like to say ... I had this funny thing. One of my first jobs I had when I was working on Wall Street, I was a financial advisor at a very good firm, and there were lots of financial advisors working there. I noticed something very interesting that applies to the narcissist in the divorce context.

 

What was interesting is the personality of the financial advisors, their clients would also share a similar personality to that advisor. What do I mean by that? So there would be a financial advisor who was very ADD, always wanted things really snappy, was kind of all over the place, and when their clients called, their clients were the same way, very ADD, a little bit all over the place, kind of snappy, and that was interesting.

 

Then conversely is there would be an advisor there, and he would be very thoughtful, very deep thinker, very analytical, relatively quiet, not kind of a big sales personality, and when that person's clients called, that's what they were like, the clients. They were generally very thoughtful, very analytical, very deep thinkers. It was interesting because I was sitting around, I don't know, 20 or 30 very successful financial advisors, and in general, all of their clients matched their personalities, and it was one of the weirdest things I had noticed.

 

Why do I bring this up? Well, in the divorce context, it turns out that narcissists tend to find lawyers with those same personality traits. What could have been even a reasonable process becomes that much harder, because not only is the spouse suffering on the scale of narcissism to an extreme degree, but their attorneys are often further complicating that situation rather than helping it.

 

It turns out, at least in my experience, I can't speak for everyone, but oftentimes, those with narcissistic personality disorder tend to have very narcissistic attorneys who are just a pain and a half to deal with. I can't stand them, to be quite frank. Least favorite people to deal with in the legal process.

 

I don't mind a mean attorney, I don't mind any form of attorney except for the narcissistic ones. I can deal with the mean ones, but those who are just full of themselves and have clients who are equally that level are the biggest pain. I think if you were to talk to any very good divorce attorney, they would say the exact same thing. Every town and every city across America, there are attorneys who share these capabilities, and also attract those very frustrating clients who are probably like your spouse if you're listening to this.

 

Now, all that said, let's shift gears a little bit. What do you do? What are the strategies ... and I'm really just going to go through three ... strategies that you can put into place to deal with a narcissist during the divorce process? I like to only discuss three strategies, because if you focus on these three things, you will be focused on the right things, and actually, I use the word, "focus," because one of the challenges with dealing with a narcissist is small things become big, and you can quickly lose sight of the big picture, or as I like to say, "You can't see the forest for the trees."

 

I only want you to focus on a few things, and if you focus on those few things, you will get through in the grand scheme of things in the best position possible. So what are those three things? The first is document everything and get organized. The second is make sure you get an experienced attorney, and the third is you're the CEO. Remove emotions from this process.

Now, I'm going to get into each one of these three things, and intentionally, this is a little bit longer episode, because I think it's a very important one, and I'm going to go through these three topics. First one, document everything and get organized. Even though you're dealing with a narcissistic spouse, it's only one part of the process.

 

You still have everything that you're dealing with in divorce. Your spouse's personality characteristics are just something on top of that. It's a little frustrating, but you still have to deal with all the custody issues, hidden assets, unwillingness to compromise, trying to come up with a settlement agreement.

 

One of the things that really helps during this process is staying ... not only staying organized, but documenting everything that's going on, and everything that's happening. When I say, "document everything that's happening," is it can be overwhelming trying to keep up with all of the major events in your divorce process, particularly with a narcissistic spouse. Sometimes I'll talk to you or work with you over a long period of time, and you'll have 100 specific examples of things that have happened.

 

Of those 100 examples, it's just really hard to keep track, like what's going on, because you're living with these things, but we're trying to help you from the outside, and trying to catch up on these stories, and make sure that we do the best we can for you. So here's what I suggest you do when dealing with a narcissistic spouse, is you put together a timeline, a very, very simple timeline in chronological order, of the things that are happening. If you have evidence of those things, you supply the evidence of them. I really mean one or two pages of just the main things in the divorce.

 

What would I do? I would take a document, or a spreadsheet, or write it by hand, you put the date. So you're going to put June 4th and the year, and you're going to say, "Spouse yelled at me for this, and this happened," or whatever. Then you're going to say, "June 18th, X amount of money was suspiciously withdrawn from bank account. Unsure of where it went." And you're going to put behind that, is you're going to put a bank statement with that withdrawal on June ... I forgot what date I already said, we'll just say June 20th.

 

Then you're going to go to July, and say, "In July kids were with spouse. They did not eat for 18 hours according to them. Came home hungry, no food, and were unhappy," and you're going to write that down. You might say, "On July 17th," and whatever happened. You might say, "Police were called." Sometimes that happens with many of you. You'll say, "Here's the police copy of the police report."

 

Whatever the different things are, I'm just making up those examples off the top of my head, but you'll have a very simple timeline with the date, one sentence or two sentences of what happened, and if you have evidence of it, any evidence of what happened. Might be text messages, might be photos, might be bank statements, might be any number of things that could have happened, and you're just going to put that together in one file, and keep it organized.

 

One of the biggest challenges for your attorney or for me when it comes to helping you through this process is not only ... The most frustrating thing about dealing with a narcissist is it can be very isolating for you, and very overwhelming for us trying to help you. The goal is ... and I'm going to talk about each of those.

 

Let me talk about overwhelming for a second. So many things are going on, it's hard for me or hard for your attorney to keep things straight sometimes in terms of all of these different things that happen. If you have proof of them, if they're relevant for the divorce process, if they're he said she said type things, and we just need to keep them in order. So maybe we show this to a judge later, or maybe something's not relevant, or maybe it is particularly relevant, but we need to be able to keep those things straight.

 

The other thing that's relevant about that, is I said it can be very isolating. The other thing that's particular ... many things are particularly frustrating with dealing with a narcissist, but almost universally, narcissists are loved except by their family, or I should say their spouse in particular.

I know that everyone who might interact with your spouse might love that person. They might think, "Oh, Johnny's great," or, "Oh, Jill is awesome. Love getting a beer with Jill," or, "Have a great relationship with Johnny, I always say hi to him. I know he's the best." Always walking around the restaurant, or walking around town greeting people, and everyone knows who they are, and very well liked, but when they come home, they're a terror to you, and they don't treat you well, and it's awful, and it's very isolating, because you might feel that people don't believe that this person is actually not as good as everyone thinks.

 

One of the ways to combat that is to really prepare yourself, and document all of these things that are happening. If you have evidence of these things that are happening, and documented clearly, it's easy to change the narrative in this divorce process about who this person is, and really get the truth about them out, and advocate yourself and fight back. Narcissists are often bullies, and they like to yell and scream and everything else, but there is a truth that is happening, and you can expose that truth when you have the appropriate evidence together.

A lot about point number one, document everything, get organized. That is crucial in this process. Point number two is get an experienced attorney. Now, I talk about attorneys a lot on this show, and I don't have a ton of additional things to add, but I do want to talk about an attorney in the context of the divorce process.

 

Now, my last episode was how to find an attorney if you don't know anyone, so listen to that. Also in the store, if you get the Quick Start Guide, I have a big section on how to manage and improve your relationship with your attorney. Even with some of the coaching clients, particularly those I work with over a longer basis, I'll help you strategize, well, what's the best communication process with this attorney, and how do we do it effectively?

 

What I wanted to bring up though, is if you follow my resources on picking an attorney, one of the questions if you know, and if you're listening to this episode, doing some additional research, and you figure out that your spouse really has some pretty severe narcissistic tendencies, well, that really comes into play as you pick your attorney.

 

In particular, in your initial consultation, you should be asking ... well, one is you should have this beautiful timeline that's clearly documented, and you should say, "Look, I'm dealing with a narcissistic spouse," one question you should ask, "Have you dealt with spouses like this before? Do you have strategies in place? How do you feel like we should approach this given the information we have? If this were to go in front of a judge, what do you think? Will the cost of this divorce be more because of the nature of my spouse? Can you tell me how things would change, or what I should be thinking about? Will the length of time be longer because of my spouse? If my spouse weren't like this, would you have a different approach?"

 

These are kind of questions that you should be asking your attorney during your initial consultation or your early consultations, because it can be very relevant as you think about who you hire as your divorce attorney. Now, I know some of you will look for attorneys that specialize in narcissism, or will have it on their website. I'll tell you this, that's probably not the best method.

Most attorneys that I know that are very good that I work with who are super experienced, they are not ... they don't necessarily have a section of their website dedicated to narcissistic spouses. That said, I guarantee you, they have all dealt with them all the time, because that is just part of this process, and part of what they do. Just because someone's website doesn't say it, I wouldn't say that's a cause for concern. I would just look for a generally very good, very competent attorney, and I promise you, they will have seen it dozens or hundreds of times, unfortunately.

 

So the second thing was getting an experienced attorney. Now, the third thing is you are the CEO of your divorce, now remove your emotions from this process. Much easier said than done, but let me tell you what I'm getting at. Whether you are a stay at home mom, or dad, or maybe you're the one who was out working, it doesn't really matter.

 

If you were a stay at home parent and you've been running the household this whole time for the last two years, or 25 years, whatever it is, you have been the CEO, the Chief Executive Officer of your household. If you've been the one at work every day for the last two or 25 years, however long you've been married, you have been the financial earner out after it, earning the money, and earning the lifestyle.

 

Whatever the case is, you have a lot more experience and a lot more capabilities than you probably give yourself credit for. When it comes to dealing with a narcissist, or a narcissistic spouse, one of the things that you should be doing is really treating this divorce process as if you are the CEO of this divorce process, which you are. You have many more skills, regardless of what your spouse might say to you. Oftentimes they're trying to belittle you, or they're berating you, or they're just a terror at home.

 

I get it, but it doesn't lower your individual value, and it actually ... you have a lot more to it than you think, and a lot more skills than you think. When it comes to deciding what the best courses of action are during the divorce, you need to take that individual person out of it to the extent you can. It's almost impossible to remove emotions from the process, but go to therapists, talk to friends. I give lots of different advice in this podcast or via the Quick Start Guide in the store, or via coaching calls on this subject, but the point is, is when you try and decide what's best for you, you need to treat it through the lens of, "All right, I have to ... this divorce process will end one day."

 

It might not feel like it now. For some of you it might be a few months, and for others it might be a few years, but whatever that time period is, it will be over at some point. Really, your main goals should be, "Well, when this process is over, I'm going to have 10, or 30, or 50, or 70 years life left ahead of me. How do I make the smartest decisions today regarding my finances, regarding my kids, regarding my family today, that will set me up for the next 10, or 20, or 50, or 70 years of life?"

 

When you think about those decisions, you have to take the emotions out of them. You have to think, "Well, what are the dollars and cents? What are realistically the best options for me, my children? If I were a third party thinking about this, and if I were giving myself advice 10 years from now, or 20 years from now, what would I say to myself today as I go through this process, or what advice should I be getting from a third party that will really ... If I were just the boss of this process, the CEO of this process, what decisions would I be making to get me through it?"

If you make decisions from emotions, your emotions can easily lead you astray during this time, but if you make your decisions through logic, you can start to cut through all the fluff, cut through the bullying, cut through the rough nights, cut through all of this, and really focus on, "Hey, here's what I want. Here are my three goals," or, "Here are my five goals." I've talked about goals on this in the podcast.

 

"Here's what I want for my future. I know he or she is going to say this or that, or whatever in this process, but that doesn't matter. Here's what I'm focused on, here's what I'm going to fight for for myself, here's what I need to get through this process in one piece. That is what I'm going to fight for, regardless of what my spouse decides to do or tries to do, because I'm the CEO. I'm the boss of this process, and I'm going to put myself in the best position possible for my future, and for my kids' future."

 

When you start to adopt that attitude, you will really shift the way that you think about dealing with divorce with a narcissist, and it will be a much better position for you for the future, and for the long-term in setting up things the way that you need to set them up. You will be putting yourself in a position to fight back, and to make the smartest decisions you can to put yourself into a position to get you into a good spot not just for the next six months or the next year, but really for the rest of your life.

 

So as I said, three pieces of advice for dealing with a narcissist. The first is document everything and get extra organized. The second is make sure you get an experienced attorney who has the knowledge and strategic thought and thinking, and knows how to handle a narcissist, and the third is remember that you are the CEO of this process, and you need to treat yourself as such.

Try to use logic and smart thinking over emotions during this process, even though it is a tough time for you unquestionably, but know that if you think about it, the smartest way possible, you will get through this process in one piece, and you will get yourself through this process in a position to set yourself up for a great future.

 

 

Sep 26, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

 

Thank you for listening! Find a transcript of this episode below.

 

How do you pick a divorce attorney if you don't know anyone? A lot of people just guess, they'll search online, type in “divorce attorney near me”, and that's the attorney you pick. Well I don't think that's necessarily the best option. I wanna give you some guiding principles in terms of how you can pick a good divorce attorney without having to know anyone in advance. A divorce attorney is one of the most important, if not the most important, decision you make during the divorce process.


Finding a good attorney can be tough, I mean how do you know that that firm that you're going to call is really good? Are there any ways that you can narrow down your search to at least improve your chances of getting a good attorney? The way I think about some of the information in here is I know an attorney, so I'm here in Dallas, and I know an attorney who might be looking for someone in Florida. And I'm going to tell you the same methods that the good attorneys will use to recommend an attorney to someone if they aren't in the right state.

 

It's actually not that complicated, there's a few things that you can look for that will very easily help you pick a very good, very competent attorney. I'm gonna go through those ... Four issues that I'm gonna go through, and I'm just gonna go through them quickly, and this should be your framework if you don't know what attorney to choose, or if you're looking for a new attorney for any reason.

 

Here they are, the first one is they should be a member of the AAML. That is the American Academy for Matrimonial Lawyers, AAML. Every family lawyer knows what that is, and if they don't that's a problem. But there's a website, aaml.org. If you find ... The AAML is a group of attorneys, they vote each other in as I understand it, but they all have a minimum level of experience and they are all respected by their peers. So what you can do is you go to the AAML website, you type in your city and state, and they will provide a list of their fellows within them.


Of 1,000 attorneys, maybe 20 actually get into the AAML in a given place, and so most, if not all, but most of the attorneys in that group are very, very good and very respected. So you go the website and you pick one out.

The second thing that you should do is look for board-certified attorneys. Many states, not all states, but many states have a state board that certifies an attorney in a particular practice area. Could be family law, could be personal injury, could be trial law, could be education law, could be estate planning. But if your state has a board certification you should type in “board-certified family lawyer Missouri”, or “board-certified family lawyer California”, or “board-certified family lawyer Virginia”, and the attorneys who pass the board exams, it's always a very rigorous process and only a small percentage of people pass it. I think the number for Texas is less than 3% of attorneys in an area pass the board certification.


There's minimum requirements they have to make in terms of length of time, experience, etc. But if you do that, then those people will also often be very, very good attorneys. So we have number one is the AAML, number two is board certification.

 

Number three is you should, or can, ask another lawyer. If you know other attorneys, then they can help provide recommendations for you. This method is not foolproof, because everyone has their friends, and you can be steered astray. So if you ask an attorney I would still check number one and number two to make sure they fit those minimum criteria.

Then the fourth thing I want to recommend is reviews and testimonials. Check them out. If your attorney does not have reviews and testimonials, that can be a red flag. You need to see what other people are saying about that attorney. If they don't have any, that may be they're just not very good at their online marketing. But if they have a bunch of negative ones, you should read those negative comments, and conversely if they have lots of positive ones you should see what people like about that attorney. But you should check the reviews.


So the perfect attorney, if I had to find the perfect attorney, I would ask all of my lawyer friends that I have, I'd say, “Hey, can you recommend me a family law attorney?” I would double check to see if they're part of the AAML. If they are they will usually have that badge right on their website. I would check to see if they're board-certified, if they are that's awesome, it's right on their website. I would check their reviews, if they have lots of great reviews then that is perfect, and it's right on their website. And then if I have those four things, you are 95% of the time going to have a very, very good attorney in your corner.


You can still end up with someone who might not be a good fit for you, now that's a separate conversation, and actually in the store if you get the divorce quickstart guide, I have tons of resources on how to manage your attorney, making sure your attorney's doing the right things for you, and other elements of the attorney relationship that I haven't talked about for a while are all available in the store under the quickstart guide, which is the archives for the podcast. It has almost 50 hours of information, and it's one of the best resources available out there in terms of having a wealth of information at your fingertips.


I know some people who have listened to the podcast more times than I have, and they got it at the quickstart guide. There are questions about fit for your attorney, but if you get an attorney that has lots of good reviews, AAML, board-certified, and recommended from other attorneys, you are going to be most of the time, 95% of the time, in very good hands in terms of negotiating your book ... Or sorry, negotiating your divorce and the future settlement.


Now, there's something that I do want to bring to your attention, and sometimes people ask me, is they say, “Hey, can you recommend an attorney for me in city and state here?” Well, I'm very upfront with people, I have a handful of about 10 attorneys, less than 10 actually, across the whole United States that I've worked with closely for a while that I can truly recommend to you. You just happen to be in one of those areas for me to recommend someone to you, but I still get to recommend an attorney once or twice a week of that handful of people on the list.


That said, in a coaching call one of the things that we will do is we will go through these methods and help you narrow down that list of potential attorneys, or I'll follow up with you after a coaching call to say, “Hey, why don't you call these three firms or two firms, schedule an initial consultation, see what you like the best, and go from there.”


But ultimately I'm going to be doing exactly what I just went through with you. I'm gonna figure out where you live, I'm gonna go to the AAML website, I'm going to see if they're board-certified as well, I'm gonna check their reviews. And if I happen to know a lawyer in that part of the country I'm gonna ask my lawyer friends and say, “Hey, do you know anything about Jane Doe or John Smith?”


But it's not that much more complicated than what I just said. You need to ... There's no guarantee in this process unfortunately. It's tough, and it can be a challenge to find that attorney, and even if you do everything perfectly, it can be off. And you might end up with someone who's not good for you.


But if you follow these four steps, you're in a very good position going forward, and if you're still trying to choose your attorney, or you're still early in the divorce process, or maybe you just want an initial consultation with someone, these are the steps that I would tell my best friend to follow to find someone good for them.


Sep 12, 2018

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Thank you for listening! Find a transcript of this episode below.

 

In this episode, I want to discuss do it yourself divorce and specifically whether or not it can work. Do it yourself divorce, just to make sure we're all on the same page, means not having an attorney represent you or your spouse during the divorce process. Basically, the two of you decide to work out all of the issues together yourself and you don't involve lawyers in the process and it actually has a term also called Pro Se divorce. If you ever see the term Pro Se divorce, it's a form or it's the same thing as do it yourself divorce and a lot of people choose this process and actually, I was speaking to several attorneys recently and they said it's becoming a more and more common practice and for good reason. In many cases, depending upon your situation, you might not need an attorney.

 

So in this episode I want to discuss some of the situations in which do it yourself divorce can work and some little tips to help you navigate that process should you proceed with do it yourself divorce, and also just some other considerations to think about. Now, when you go the do it yourself divorce route, there are three specific benefits that I like for people to keep in mind. Number one is that it is generally a much cheaper process. Look, you can pursue a do it yourself divorce if in the base level for only the court filing fees. I'm gonna talk about that in a little bit about going to the court, but basically, you are saving perhaps many thousands or tens of thousands of dollars by doing the process yourself. Just cheaper. You're not paying hundreds of dollars per hour for lawyers fees.

 

The second thing, the second benefit is that it's usually a less contentious process. Now, in the context of divorce, almost everything is contentious and let's get that out of the way. But there are degrees of fighting, you're getting divorced for a reason. Things aren't working out. We got it. So when I say a less contentious process, when you go do it yourself divorce route, it means that you and your spouse can have civil conversations, and even though this is a painful process, you can work things out between the two of you in a civilized manner. Yes, there are still emotions involved. Yes, you probably aren't going to be happy about all of this, but you can talk with each other and talk to each other and therefore work things out. Also as part of that is you can split your stuff up in a reasonable way. You're not going to be spending $5,000 trying to determine who gets the blender that's in the house or the food processor or whatever else.


Then the third benefit is, or I'll just say the third, this isn't necessarily a benefit, but the third thing to keep in mind is that almost anyone who's against do it yourself divorce is an attorney and there's a reason for that is because the attorneys do not get their fees as part of the process. So, there are downsides to do it yourself divorce, and I'm going to get into those in a little bit, but most of the time it can work if you think it can work and you fit the right conditions. Now, what are those conditions for do it yourself divorce? There are some things that really should be in place, otherwise you're going to run into trouble and the money you save is not going to be worth the effort of doing this yourself, and it's probably a better, probably would've been a better solution to pursue another divorce methods.


So, I like to keep things simple. I'm going to keep it a list of three things, three conditions that you should have before pursuing do it yourself divorce. The first one is both of you should have a very clear understanding of all of your assets and your debts. Or to put it another way, you both need to have a clear picture of everything that you own and that you owe. You need to know, if you have a house, how much is the house is worth and be able to agree upon that. If you have a mortgage, if you have credit cards, if you have a 401k or a pension plan or other retirement accounts, if you have cars, if you have other assets around, you need to know what those things are and both of you need to be on the same page regarding them. If you're not, do it yourself divorce is probably not the best option for you.


The second thing is you cannot have complex custody issues. Complex custody issues are a challenge to say the least. An attorney I work very closely with who will probably be on the podcast in the coming months, specializes in complex custody cases and just from knowing her and the types of issues she deals with and the book that she just wrote on the subject, it is one of the toughest things that you can deal with as part of the divorce process, and if you have a complex custody issue, do it yourself divorce is not for you. Now, the third condition that you need to have is the ability to negotiate a reasonable agreement with your soon to be ex-spouse. Now, I didn't say you have to like your soon to be ex-spouse, but you have to both be in a position to understand and agree to something that's fair.


Now, there is no divorce agreement in the history of divorce agreements that's perfect, right? Almost never do I see two people smiling at the end of the divorce settlement and saying, "I got everything I wanted, I'm ready to go," and if that does happen, there's probably an issue and someone got cheated. Most of the time, this has to be some sort of an agreement where neither one of you are perfectly happy, but you can live with the results of the process and if one of you is trying to "win" in the divorce process or trying to punish the other spouse or has some other issues that prevent you from negotiating something reasonable, then do it yourself divorce is not for you and you should most likely pursue other methods.


So let's say you have those three things, look, you have, you understand what you own and what you owe, and the other thing I meant to say about that one is that if you have complicated assets, do it yourself divorce is usually not the right idea. Second is you don't have complex custody issues, and third is you think you and your spouse can work out something reasonable. So what do you do if you're going to pursue a do it yourself divorce? Well, what I recommend is you write up your agreement. You put it all on paper. I've seen spouses negotiate it and sit down around the kitchen table and come up with an agreement. I've seen spouses do it by email. I have a number of people that I've worked with over the years who will email each other back and forth some detailed agreements.

 

I know spouses who do it in any number of methods and ways, but whatever it is, you need to put it on paper and you need to work out, you say, "Hey, here's what we're going to do." I like to do things big to small, so if your biggest asset for most people is a house, second big asset is a retirement account, but if that, let's just assume for a moment your house is the biggest thing, you'd say, "All right, here's what we're going to do about the house. We're going to put it up for sale. We're going to split the proceeds 50-50," or whatever you think is right or one is going to keep the house or whatever else, and then when you come to agreement about the house, you move on to the next asset and the next asset then the next asset, and or maybe if you have debts to consider, then you go through down the line on the debts. But the point is is you negotiate something reasonable and you go through each thing and you put these items on paper and you come up with what you want your agreement to be.

 

Now it doesn't stop there. Next thing you have to do is you have to figure out how you're going to actually file the paperwork. One complexity about the divorce process that's really challenging is that every county has a different divorce procedure in the United States. I'm going to give you an example. I'm based in Dallas, but I travel very frequently. Dallas, where I am in the city of Dallas, there is about four to five counties within a 20-minute drive of where I live. Each one of those counties handles divorce totally differently, even though they're all in the city of Dallas or the Dallas metroplex, each county has different rules, different procedures, different judges, different processes, so that's one issue.

 

Another issue that's involved is they have different paperwork and so you need to understand what county you're going to file in and how to do that. Now, one, there's a few solutions that are out there in terms of figuring out the right paperwork to get. One thing you can do if you really want to keep costs to a minimum is drive to your county courthouse. If you go to your county courthouse, you go to one of the clerks at the windows and you can ask them, "What divorce paperwork do I need?" and they can point you in the right direction. Some counties actually have it on their county website, but you need to make sure you get your appropriate county's paperwork because even though the laws might apply on a statewide basis, the exact procedures occur county by county.


Second thing you need to or so one method I said is is going to the clerk. Another method potentially is going online. Now, aside from going to the court's website, you can also use one of the online divorce services. There are many do it yourself divorce services that guarantee that they'll provide you the right paperwork and it'll be filled out correctly and whatever else, and usually those services go anywhere from I've seen $150 upwards to about a thousand dollars and, if you get a reputable one, there's a lot of questionable ones out there, but if you get a reputable one, they can help you in that process and through that process.


Now, another thing you can do is either work with a paralegal or an attorney on an uncontested divorce package. Many attorneys in just about any city have an uncontested divorce pack, uncontested divorce package where it is usually a fixed fee package that you pay and they guarantee that the paperwork works or will be handled appropriately for you. So it's usually between a thousand and $3,000 depending upon where you are, but you get to guarantee that everything you've done is ... That everything that you've done and submitted is correct. Here's why this might be a good option. You might have all the paperwork, you might go to the court, you might have everything correct, you might submit it in the right way, but guess what? Unfortunately, this is a complicated process and papers can get rejected for oftentimes some of the silliest, smallest reasons.
Court paperwork, I've almost never ... I'm sure there's a state somewhere that's good, but I haven't found it yet. Almost no court paperwork is easy to navigate. It is complicated. I haven't talked about this example in a while, but the state of New York where I have lots of clients, New York, California, Texas are my three biggest but all across the country, lots of clients. But in New York, the New York paperwork is so difficult to complete. Even just the basic paperwork, I hate looking at it. It's necessary, but it is not very user-friendly. The point being is if you have a little bit of money saved aside, it can be cost efficient just to say, "Hey, we want an uncontested divorce, here's everything we've already agreed to. Can you just check over it and fill out the paperwork for us, please, attorney," and you can do that for a fixed fee.


So it's okay if you're going through a do it yourself divorce to get limited help. So that's the other thing I would say is so those are the options for filing the paperwork but just my last tips for those considering do it yourself divorce is consider getting some additional help, what I call as the sanity check. One of the most common things or the biggest things I recommend is maybe once you've come up with a full agreement and you got everything down, it can be worth having an attorney or an associate or a paralegal or me, via a coaching session say, "Hey, this is everything that we've agreed to. I think it looks good. Why don't you read over it? Give it a check and let me know what you think," and oftentimes you might see something. Someone who looks at these, hopefully for you, this is the only time you have to deal with this, but someone who sees hundreds or thousands of divorces can say, "Hey, you're missing one, two and three," or "Hey, it might be better if you consider this thing for a tax purpose," or "Hey, you're going to both end up in the same position, but maybe we should split stuff in this manner instead of the way you propose."


It can be pretty quick for someone who looks at these things all the time to figure out what the best options are. So I might say for some people, and I tell people all the time, go sit down for an hour with someone or 30 minutes with someone just to get a second opinion just to make sure that everything is okay. It doesn't mean that what you've done is bad, but sometimes it can be helpful just to have that other set of eyes. Look, do it yourself divorce, if the issues at hand are not too complicated, I'm a big proponent of it. I mean, I think you should by all means save money in your divorce. It's not for everyone and it won't work in every situation, but if you are in a position where you think it can work for you, definitely start by pursuing that path.
It doesn't necessarily mean that you have to. There's options you can pursue the do it yourself divorce path and then, looks like things aren't working out the way you would have wanted them to and therefore you switch up and you do both get attorneys. But if you think you can start with the do it yourself divorce and resolve things that way, by all means, check it out because it could be a good solution for your situation.


Aug 29, 2018

One of Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

 

Thank you for listening! Find a transcript of this episode below.

 

The most important decisions you can make, during the divorce process is, choosing a good attorney, and having a good attorney work for you and on behalf of you. One of the main questions I get with a lot of people is, is my attorney doing a good job? I have the fortune of working with attorneys, family law attorneys, seven days a week. I can tell you which attorneys are good and which are less good. Actually, even from time to time on the coaching calls, I will make a recommendation for an attorney if you happen to live in a city where I know an attorney, who is a good one. But that happens only on the coaching calls.

 

If you don't have a good attorney yet and you're looking for one, I'm going to record an episode on how to choose ... another episode on how to choose an attorney. I already have lots in the archives. But I can also help, sometimes, on coaching calls, help you figure out, hey, who are the best two or three attorneys near you that can help you through your divorce process.

 

But the subject of today's episode is for all of you who already have attorneys, are they doing a good job for you? What I want to go through is I want to give basically four characteristics that pretty much every great law firm, in general, but particularly during the divorce process, has when it comes to an attorney ... and providing a good service. I want to go through these four things that you should be looking out for, and asking yourself if they apply to your attorney and to your case. If they don't, you need to think hard about what the best way is to proceed for you.

 

So, here are the four things. The first is your attorney advocates on your behalf and creates a good game plan for your case. The second is that they provide responsive customer service. The third is that there are no surprise bills that come due for you. And the fourth is they help you through the case closing process. I'm going to jump in and discuss each one of these four things in a little bit more depth.

 

Let's start with part one, is that your attorney advocates for you and executes a clear game plan for your case. Well, what does that mean? Well, I think 100% of the people that are listening to this want ... if you have an attorney, you want your attorney to be in your corner. Simple as that. And a lot of times, you will say, "Hey, I don't think ... " and here's the phrase that I hear far more often than I should is they say, "I don't think that my attorney is fighting for me." And that's unacceptable. When you pick an attorney, you're hiring that person, you're paying them a lot of money, and you want them to feel like or that they're fighting for your best interest, and getting what you deserve as part of this process. You want your attorney to set you up in the best position possible for your future.

 

Sometimes ... you know, I say all the time, your state laws vary and what your attorney can and can't do, in certain situations, can be very different, depending upon your individual circumstances, what's going on in your case, what the law says, et cetera, the particular dynamics. But, one of the most frustrating things I hear is you'll say, "Hey, I brought this up to my attorney, and they ignored me." Or they said, "It won't work," but didn't explain why. Or they said, "Well, I should just do this." And you don't want your attorney ... it's okay if you suggest something that might be outside of the course of the law, or maybe incorrect, but you want your attorney to at least understand your position on certain items, and make sure that even if you are presenting something that might not be logical or might not be in your best interest, that your attorney sits down and explains, "Hey, John ... Hey, Jane, here's ... I understand your concern. I understand what you're getting at, but here's why the law says otherwise." Or, "This is what the judge says." Or, "Here's why I don't think that's the best example in your case and here's a better solution for you." You always want that person to be advocating for you and on your behalf.

 

The other thing that's very important as part of this advocate process, is you want your attorney to have a clear game plan for you. One question I ask ... or I encourage you to ask every attorney in every initial consultation, or even if you've already hired that person, you should say, "Hey," ... this is a very important question. You should write this down. "Given what you know about my case, what do you think are the range of outcomes that I could be looking at?" And what does that mean? I'll say it again.

 

I'll say the question again, then I'll get to what I'm getting at. "Given the circumstances, and the facts of my case that you know now, what do you think are the likely range of outcomes, based on your experience?" And here's what we are going for. The question is, is your attorney should be able to say, "Hey, based on the facts of the case, you'll probably get about ... between 40% and 60% of these assets. The exact split may be a little bit different. I think your child support will come in around this amount. Your spousal support will come in around this amount. Here's probably how the custody will work itself out. And ultimately, here's what the court will likely say, if we were to go in front of a judge. And so, the goal is, is given this information, I think this is how we should proceed through the case and negotiate and get what you deserve." I think this is the best option.

 

If your attorney doesn't explain something like that to you, then that's a real problem. You should have a very good sense of what your game plan is, at all times throughout your case. Now, the game plan doesn't have to be fixed, but you should know, from the very first appointment, what that overall strategy looks like. That strategy certainly changes as the dynamics on the ground change, and certain tactics pop up, and whatever else. But, if your attorney doesn't have a clear game plan for you, then that can be problematic. Sometimes, the game plan is we're just going to have to go to court to deal with some of these issues because the spouse is being unresponsive. Other times, the game plan is ... actually, sometimes the game plan is ... and I have this with a lot of people that I work with ... is, I don't know what the game plan is quite yet. Here's what I know, is we know that there's these assets thus far. We need to get more information. So, the game plan for now is we're going to subpoena, or request, a bunch of additional information, and once we have that information, we will have a much clearer picture of what we should be asking for, and I can update you with more then.

 

There could be other game plans in between, that are very specific, that say, "Hey, here's what the state laws are. This case is pretty clear cut. This is what we should get to, and ask for, and as long as everyone's reasonable, this is what you should probably end with at the end of this process." Your attorney should have some form of an answer for that question. They should be, at every step of the way, helping you get to that position. So, that's enough on number one, which is advocating and executing a clear game plan for your case.

 

The second thing is providing responsive customer service. What do I mean by that? Responsive customer service really just boils down to some very simple things that bad attorneys don't do. Very simple, is they should be returning your phone calls and messages within a timely fashion. I usually say within 24 hours. Even if it's to say, "Hey, I need some more time to look into this." But, I know ... and I hear from you ... attorneys that do not reply to you for a week or two at a time. That is unacceptable under any circumstance. For most of the people I work with closely ... and I try and practice what I preach ... you'll hear from me within the hour, or certainly within the day. If something's urgent that comes up, you call me immediately and I'll try and stop whatever I'm doing to help you, if I can.

 

Your attorneys should be doing the same thing. We're all busy, all trying to help you, but if you have a question, and you say, "Hey, here's my list of questions," they should be able to say, "Hey, let's schedule some time later this week to talk about it," or they should reply to that email, or they should have an assistant say, "Hey, these are the things that you should ... that we'll get back to you with some answers soon."

 

The other thing they should be doing is they need to be keeping you updated with deadlines. The legal process is filled with deadlines. Courts or documents that you need to submit to the court, or depositions, or requests for information, or any number of things that you should be thinking about, you need to be keeping track of those and keep updated with those items as things go along.

 

And the worst thing that can happen is ... actually is ... I hear this from time to time, is there's attorneys out there that won't tell their clients that there's a big deadline coming up. Or, they'll tell you the day before. So, I'll have a client say ... we'll be speaking on a Wednesday, and then on Thursday, they get an email that says, "Hey, on Friday, we have a big court date." And that is unacceptable. You need to know ... these things are scheduled, oftentimes, months in advance, and you should know months in advance, or weeks in advance, or as soon as possible, what deadlines you need to mark on your calendar and be prepared for.

 

And the other thing, when it comes to responsive customer service, is just keeping you informed on what's going on. Now, unfortunately, the divorce process isn't just a continual step-by-step thing, in most cases, and there's often gaps of weeks, sometimes even months, between things that happen. That's okay. But, you need to know what's going on. One of the best attorneys that I know in the country, that I work with, who's based in Florida, in Orlando, he does this cool thing. At the end of each month, he goes through every case that he has open, and he sends a short video, two minute video that he records at his computer screen, and says, "Hey, John, just want to send you a monthly wrap-up. Here's what's going on in your case. We did X, Y, and Z, this month. Next month, here's what you should expect. Just wanted to make sure that you keep updated." Two minutes. That's all he sends, even if nothing's going on, but if something's happening, or whatever, he can just say ... just do a quick check in, just to know that he's still thinking about you and your situation. If there's a lot more going on in your case, then he'll record a longer video, but you always know where you stand, and you're always informed on what's going on.

 

Now, speaking of staying informed, we're going to switch to point number three, is that you don't get a surprise bill. This one is one of those shockers. I know attorneys who will rack up ... if this has not happened to you, I guarantee all of you know someone who this has happened to ... is you pay your retainer, and the retainer gets exhausted, and the attorney keeps working for you for a while. Next thing you know is you get a bill for $17,000, or $24,000, and no explanation happens. You're looking there, and you're like, what ... you're just dumbfounded. It's like, where did this bill come from?

 

I know a lot of attorneys who might lure you in with a, "Oh, we'll just pay a $5,000 retainer and we'll get working," but that $5,000 lasts a week and a half, and then they start asking you for a lot more money. And then I also know attorneys who say, "Hey, you're going to pay me $25,000 up front." Guess what though, there's not going to be a surprise bill. We're going to get this done for $25,000. It might take a week. It might take two years, but you know, there's nothing that ... there's not going to be any surprises. If it only takes a week, you're going to be happy, 'cause you know that the exposure wasn't ... you know, you paid $25,000 for a fast week, but if it takes longer than that, you already know that things are good. But, in any case, they communicate very clearly the cost of what is going on, and you're never in shock when you receive a bill.

 

Doesn't mean that this process going to be cheap. I was having dinner with an attorney I work closely with, a few weeks ago. And she told me that she has a client that has a very complex custody battle, that was over a million dollars in legal fees. So, it's not necessarily going to be cheap, and hopefully you're not going to spend a million dollars in legal fees, but sometimes it is necessary. But, there were no surprises and believe it or not, this person who spent a million dollars in legal fees is one of the happiest clients that can exist because they were able to get what they needed out of the divorce process. It was a long and complicated battle. There were no surprises. It was going to be expensive. But, it was what it was.

 

And while I think about billing, as well as the other thing that you should make sure you really understand, is how your attorney charges for billing. You should try and get a sense ... and it's okay if you have to ask this question after you've hired the attorney but, try and get a sense. Do they bill by the quarter hour? Do they bill every six minutes. How do they bill you if you send a quick email? Is that a 15 minute bill minimum charge? Or is it something else? You should figure out what that billing is, so you're not surprised down the line. 'Cause even a 15 minute conversation, for an attorney, who is $600 an hour, can cost you $150 for 15 minutes, which can be a lot of money. And that adds up. And so you want to make sure you maximize the time and the interactions with your attorney.

 

And finally, the last thing you should be thinking about, and what a good attorney will do for you, is help you out through the case closing process. This is very important, which is just because you sign a divorce decree, doesn't mean the divorce is over. I talked about this on previous episodes, very recent previous episodes. It can be very tempting to just put on the brakes and ... I wish you could see my hand motion, but pretend like your hands are clean, and you can move on.

 

Unfortunately, it's not that simple. There's a lot of stuff that has to happen after the case is over, or at least after you've signed the divorce decree. And there's a lot of assets that have to move, custody schedules, support that has to be paid, et cetera, et cetera, that need to be documented and done. Every great attorney that I work with has a very specific case closing process, that is quite robust and substantial, and probably has 30 or 40 things on it. And they will help you still through that case closing process, and then make sure that all of the things that you were supposed to get as part of this process, actually happen. And if there is an issue ... and sometimes there are ... that you get those resolved, and so you're not stuck, years down the line, saying, "Hey, wait a minute. Wasn't I supposed to do this or that?" And I actually have some people that I do coaching sessions with, who will say, "Hey, three years ago, I signed this, but I never got this asset. What do I do?" And we have to walk through how to make sure we get those things done. But, the important part is, is all of these things can be resolved right after you sign the divorce decree, so you should be paying attention to that very closely.

 

So, four things for you to remember. That your attorney advocates and executes ... sorry, I should say advocates for you, and executes a clear game plan for your case. The second thing is that they provide responsive customer service. The third is there's no surprise bills that pop up as part of the divorce process. And fourth, is they help you when the case is closing.

Aug 7, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.

Thank you for listening! Find a transcript of this episode below.

In this episode, we're talking about a major tax change to alimony coming in December. And I wanna go through what's happening, what you need to know, and how you need to plan for it. And why this could apply to your divorce if you are thinking about getting divorced this year. So at the end of 2017, the Tax Cuts and Job Act passed. This was right at the very end of last year. And there were a lot of different tax changes that occurred to many people. This was one of the biggest tax bills that passed. But, there was a small provision in there that affects alimony. And this small provision can affect many of you in a big way. And so what happens is that certain tax benefits in divorce are being eliminated effective December 31st, 2018. And this is the biggest change in alimony in about 75 years or so. And many people have forgotten about it.

 

As it is today ... Or actually, I'm gonna tell you what's happening. What is going to happen is from a tax perspective, alimony is going to be treated exactly the same way that child support is. What does that mean? It means a person who pays alimony will not get any tax benefits for paying alimony. And the person who receives alimony will not have to claim that alimony as income starting next year. Now, that is what happens on January 1 of 2019. What happens today? Well, if you get divorced during 2018, there are some important things that happen from a tax perspective. If you are the person paying alimony, and I know many of my listeners are the ones who are going to be paying, then you get to deduct that money from your taxes each year. So, if your income ... And I'm gonna give you an example in just a moment. And conversely, if you are the person receiving alimony, you have to when you file your taxes each year say, "I've got X amount in alimony." And you have to pay taxes on that amount just like it is income.

 

Now, here's why this is a big deal. And I wish more people were talking about this. The big effect of this is that there is less incentive for someone to pay alimony. And I'm going to give you some examples so we can work with some easy to understand numbers. Let's say someone is going to be paying $10,000 or a little under $10,000 a month. But, we're gonna say $100,000 a year in alimony over a 12 month period. So over one year, they're going to be paying over $8,000 and some a month in alimony. I'm using $100,000 total just to make the numbers very simple. So, someone's paying $100,000 in alimony. That means that person can deduct from their taxes $100,000 in income. Which means they have a substantial tax savings on their income each year. 'Cause they don't have to pay taxes on $100,000 of their income. It's a simplified explanation. And the reason that's beneficial for them is when they are in a divorce situation, that gives them an incentive to pay some of that alimony instead of purpose structuring a settlement in a different way.

 

But, here's what happens starting January 1 of 2019. That same person who was paying $100,000 in alimony will not get that tax benefit anymore. And so, if they were going to think about what their divorce settlement looks like, that person does not get any tax benefit for paying that $100,000 a year. And now this is only if ... And I should bring up a very important caveat. It depends on when your divorce decree is signed. If you sign your divorce decree this year, then you will still get the tax benefits if you are the person paying alimony.

 

And if you sign the divorce decree starting January 1 of 2019 or anytime beyond that is when the law changes. And the tax rules change. And so that same person who was paying $100,000, or who was willing to pay $100,000 a year in alimony, may no longer be willing to make that same commitment. Because they don't get any tax benefits for paying that alimony amount. Now, it could be depending upon who's listening. Some of you, we could be talking about $10,000 a year. Others of you, we could be talking about $100,000 a year or a million dollars a year. I have a wide range of listeners in terms of the incomes that you all have. But, regardless of your income, it will affect most of you in one way or another.

 

Now, here's the reason this is extra important. So, basically what happens is the person who would be paying alimony will at least try to pay less alimony in the future. The reason that's unfortunate is according to the census, 97 percent of the people receiving alimony are women. And so, that will disproportionately affect many of the people listening who are facing or who would in theory be getting alimony. Now, it doesn't mean you should panic. It doesn't mean that you're screwed, or you should get upset and worry, or whatever else. There are many ways around this issue and ways to still get to a good position. And I'll get into some of those. But, you should be aware that things are changing. And things are changing in a big way. And you need to be cognizant of the change.

 

And one of the things that's very important about this is timing. And this is why we're putting this episode now in August. Because there's only a few months left in the year. And so, if you are facing divorce and you're in a place where ... Maybe you're in the middle of divorce. Or you're in a position where you think you can get this wrapped up before the end of the year. Then this is something that you should consider, because it can help with the negotiating process. If you're already in the middle of the process, great. Now, if you haven't filed for divorce yet ... I'm never one to even endorse divorce, but this is one of those times where you need to decide and think hard. Is now the time to file divorce and get this process going? Because I think I may be better off given what's happening with the alimony rules.

 

And I'm gonna look at this from both side's perspective in a little bit greater detail so you really understand the consequences and what we're getting to. And the reason when you hear this episode this is particularly important is we're in August as I record this. Some of you maybe listening to this later down the line. But, many states have some version of a cooling off period when it comes to divorce. And what that means is is from the moment you file divorce to the soonest your divorce can be over, depending upon where you live, can be two or three months in some cases. Because that's what the state requires. So, some states will say, "All right. Well even if you agree to 100 percent of the issues in your divorce, it'll take you 90 days before we'll sign off on a divorce. Because that's what the law says." Or some states, it might be 60 days. Or other states, it may be 30 days. I actually have a blog post if you type in quickie divorce. There's only a handful of states where it actually can happen reasonably fast.

 

But, given that we're in August, some of you August, September, will be the last chance you have if you are in the position to take advantage of these issues. Now, if your divorce process is already commencing. Some of you, it's been going on for many months. Some of you many years. Well, you're actually okay. The real goal would be in your perspective, in most cases, will be to wrap it up before the end of the year to benefit from these ... before the tax law changes.

And why all of a sudden this big tax change? Why did this happen? Well, the simple answer is actually a lot of people were cheating on their taxes. Not saying a lot of you were. But, what happened was there was a multi billion dollar gap every year according to the IRS records of people who were paying for divorce ... Or I'm sorry. So, there was a multi billion dollar gap. So, billions of dollars people were reporting that they were paying in alimony. But, a lot of people weren't saying they were receiving alimony. And therefore, could hide or not have to pay taxes on that money. So the IRS said, as part of the tax bill, that we're gonna change the law. And so, no one's going to get a tax break. And therefore, no one can cheat on alimony.

 

And so, what I wanna do in this episode .... It's gonna be a little bit longer than the normal ones. But, I wanna go through the scenarios depending upon who you are. And just some things to think about. All of this is complicated. It just is. And it depends on your individual circumstances which decision is best for you. There's no universal right or wrong. Ultimately you should be consulting with maybe an accountant, maybe your attorney, maybe with me. And we can think through what makes the most sense for you if you have these options on the table.

 

So, I'm gonna start with the person who is paying alimony. If you were the person paying alimony, or will be paying alimony as part of the divorce process, or spousal support or maintenance. It just depending on what state you live in what they call it. It is in your best interest from a tax perspective to wrap up the divorce before the end of the year. Because every dollar you pay in alimony for now and forever in the future, barring some sort of major unexpected tax change, you get a tax benefit for paying alimony. Simple as that. You'll pay less in taxes at the end of each year if you pay alimony. I'll give you a very simple example. If you're paying $1,000 a month in alimony, you get at the end of the year $12,000 deduction in your taxes. Now, if you don't finalize your divorce until sometime in 2019 or beyond, you no longer get that benefit. So for most of the people who are paying alimony, this might be a good reason to start that process.

 

Now, if you're the person receiving alimony, or will be receiving alimony. I know that one of my most popular videos with many, many thousands of views is on stay-at-home moms and divorce advice for stay-at-home moms. Which is one of the most common populations that I work with and people I get to help. And now some of you, I know from talk to you, might be panicked at this point. But as I said before, don't panic. The situation's actually more complicated if you're the person receiving alimony. I'm going to go through a few scenarios. A few things and notes for you to think about.

 

Now, if you're negotiating ... Let's just give you an example. Let's say you're negotiating or thinking about getting about $2,000 a month in spousal support as part of the divorce settlement. And you think you're gonna get this down in 2018. But for whatever reason, your divorce isn't finalized this year. And you're gonna be looking at 2019. Well actually if you still get $2,000 a month in 2019, you're in a better position. Because you don't have to pay income tax on that $2,000 a month you would have received. You're better off than you were before. If you get that same amount in pure dollar terms. Hope that makes sense. So, if you get divorced in 2018 and you get $2,000 a month, what happens is you're gonna be paying on income tax on what's going to be $24,000 a year. But, if you were in theory to get the same $2,000 next year in 2019 or beyond, you don't have to pay income tax on that. And therefore, you get to keep all of it. That's a plus.

 

But, there's a downside. Let's say if you were thinking about or you were probably gonna get $2,000 a month in spousal support this year. Well if your spouse is savvy or your spouse has a decent attorney, they'll say, "Well, hey. I don't get that tax break anymore for it. And you're actually gonna get less. So, we're gonna make some adjustments in terms of what we pay. And maybe we're only going to pay you $1,500 a month instead of $2,000 a month." That could be substantial. Or whatever the equivalent is for them. But, that is something that will certainly happen in the divorce scenario for some people who understand the way that this calculation works.

 

Now as I always said, there is a way around it. There are always clever ways to structure your divorce settlement. And I speak with you almost everyday about certain avenues you might not have thought about. But, one of them is a lump sum distribution. I've talked about this on the podcast before. If you haven't gotten the archives, you should definitely check that out. There is the ability to get as much money up front. And therefore, you won't have the tax consequences at all. Or they'll be substantially reduced. And you can ultimately, now it's a tricky calculation, but you can ultimately get to the same place you would've gotten all at once instead of doing it over months and over years. Now, you have to go back and listen to the lump sum distribution podcast episode, which is in the store, to understand all the mechanics of that. But is a very good solution, one of several, that could work for you.

 

So tax law or not, depending on your situation, you could still end up in the exact same place you would have if you structure things the right way. Ultimately, this is a complicated issue. I just wanna bring it up and make you aware of it. There's state laws you have to deal with. There's tax laws you're gonna have to deal with. There's just the divorce process you're gonna have to deal with. Certain states are considering different measures to counteract these changes.

 

And ultimately, if I were to say anything, you need to bring these up with your attorney. Bring these up with me. Bring these up with your accountant. If you don't have an accountant, this would be a good time to pay for a one off consultation with an accountant. It's interesting. Definitely bring it up with whoever you are working with. I know some very expensive and otherwise very good attorneys who have not said a word about this. Or who were less informed. Or have not brought it up with their clients. It's not because they are bad attorneys. They just have other things going on. One of the things you need to do is bring it up and take charge yourself.

 

I also know some great attorneys who have called all their clients and are saying, "Hey, here's what we're doing. Here's what we're thinking about. Here's the tax law change. Here's how it could affect you. Here's how I recommend we proceed to either get this done or delay it." It really just depends on your individual case. But, one way or another if you have not had this conversation with your attorney, I strongly suggest that you have it. And also, feel free to reach out to me. Book a coaching call and we can walk through your scenario in a half hour or so. And get the important details with you.

 

Just some last messages. I wanna reiterate multiple times during this episode, is it's not the end of the world if you don't wrap things up this year. And for some of you, it's just not going to be feasible to wrap up your divorce this year. You might not have started in the process. Maybe you're still gathering information. Or any number. It's not right for your family, or for your life, or for any number of things. And you're still doing your research. It's okay. You will come out through the other side. I'll still be here next year. And we'll still be coming up with good solutions to help you. And interesting and useful information.

But, if you think there's a benefit for you and your scenario to get things done this year, this is a ... We're kind of at crunch time. And this is a good time to really start getting the ball rolling. And making the important solutions and decisions that you need to be making. So, you end up in the best place possible for the long term.

Jul 31, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
In this episode, we're trying to answer the question, what happens after you sign a divorce settlement, because the conception is that the divorce is over, but that's not true. There's still, unfortunately, a lot of work that needs to be done even after you have signed the divorce settlement. Because of that, I want to give you a sense of some of the things you need to be thinking about as soon as that settlement is signed because you can't just give up and call it a day. There's a lot that needs to happen after you sign the settlement and before and after the judge finally signs off on it. If you didn't listen to the previous episode, I strongly suggest you do.
                                  The two main tasks I group into these categories, the first being ensuring that you get, you receive, and also give up everything that you agree to. The second is that you need to update all of your accounts to make sure they reflect your new reality. Now, I'm going to get into what both of those things mean in depth in a moment. But the point is, is there's still a lot to do. I'm going to give you a process and a list of things to search for. For people who I go through in the coaching sessions, we oftentimes have a post divorce checklist and a post divorce summary of things you need to be thinking about the day your settlement is signed.
                                  First thing you do, step one, so you've signed the settlement, what do you do? You study it. What do I mean by study your settlement? Well, you need to gather a notepad, gather your calendar, and put yourself in a quiet room, get some highlighters, some different colored pens, however you take notes, and start making a list of everything that needs to happen as part of the divorce. You need to go, sentence by sentence, and make a note of everything you need to keep track of. If something is supposed to happen on a certain date, might be a house needs to be sold by June 30th, well you need to start putting on the calendar, "June 30th, house must be sold." Or if you get the kids' custody, if you alternate holidays every other year, well, you're going to need a multi-year calendar and start thinking about, "Oh yeah, here's the holidays every other year," and start planning those things out. Or if certain things have to happen on certain days of the week or certain times of the month, if you're expecting a payment or you have to make a payment every month on a certain day, you need to make those things and write those things down so they don't get lost. You need to start keeping track of them. These are going to be integral to your life, going forward, until they aren't.
                                  Another thing that you might need to think about as you go through your settlement, if you have to split retirement accounts, I have lots and lots of episodes in the archives about retirement accounts and QDROs and things like that. If you need to spend money or need to split the retirement accounts to get the money into the appropriate places, well, you might need a QDRO, a Q-D-R-O, QDRO. If you need one of those, those often take several months from the time that you get them to the time they're actually executed upon.
                                  Something else you need to think about. If you need to transfer money somewhere. All of these things, you're going to need to make a note of every little item that needs to happen as part of the divorce process to make sure that you're organized in there.
                                  The way that I like to do it is I actually ... It depends on your system, but oftentimes what I'll do with people is we'll go through your settlement, I'll read every line item, exactly how I described, and I'll put a little Word document together where we say, "Date, June 17th, 2018, this thing has to happen." Or "July 2019, this thing has to happen." We'll put it on one, or two, or three pages, however many pages it takes, and just list them out. Because I actually use a lot of my calendars just in a Word document format because it's easier for me to read than the normal calendar, but it's a great way to just keep everything organized. I can look and I say, "Hey, we're in the middle of August, and so, oh yeah, in two weeks, I have this thing that I need to do." If I don't and two weeks go by and that thing doesn't happen, maybe you were owed something, maybe something else, you need to make a note of that and figure out what to do. Anyways, I think you get that point.
                                  The first step was comb through your settlement and keep it all organized. The second step is to set up your new life. This is a step that a lot of people fail to handle properly in part because there's just a lot of moving parts to it and, quite frankly, some of the stuff involved in it is not the most fun thing in the world. That said, it is essential that you take care of these things. In fact, whenever I'm faced with a long, boring, and arduous process, now I don't always recommend this and you shouldn't do it too often, but I will treat myself to a nice bottle of wine or a nice, expensive drink. Now, I don't drink that much, but if I'm going to drink and I got to do some work, I'll get something expensive, treat myself, something pretty good, and I'll say, "All right, I'm going to get through this, but at least I'm going to have a couple of glasses of something nice as I go through these things that I don't necessarily want to do, but they are important.
                                  What's the first thing on that list of setting up your new life? Checking your credit report. Credit report is a very important thing to monitor. You need to make sure that everything on it makes sense. Whether you have $100 or $100 million, I strongly suggest you check your credit report. I've sat down with people of all income levels and many, many times you will find surprises on there or things you've forgotten about, and it's an essential thing that you should be doing.
                                  When you look at your credit report, of course with anything, you have to make sure that the information on there makes sense. But another thing that you should be thinking about is you should keep an eye out for every joint account. Any account that has your spouse's name on it with your name, you need to be closing. You cannot have joint accounts open. Well, you can have joint accounts open, but it's very dangerous to keep joint accounts open after you are divorced. Here's why.
                                  Believe it or not, I've seen examples like this happen. Let's say you have a house with a home equity line of credit and both of your names was on this home equity line of credit, but there was a zero balance, so you never used the home equity line of credit. You just had it, should you need it. Well, a couple of years goes by and, all of a sudden, you start getting collection notices in the mail. It turns out that you never took your name off that home equity line of credit. Your spouse, your ex-spouse for two years at this point has already ... or needed money for something, who knows what, and decided to draw down your home equity line of credit and took a bunch of money out. Guess what? They didn't pay it back, or didn't pay the interest, or didn't pay it as agreed. Who's on the hook for that? You are, even though you haven't used that account yourself, even though you've been divorced.
                                  Those little things happen all the time. If you have any joint credit cards, any joint loans, any mortgages, anything with your name on it and your ex-spouse's name on it, close it. Or at least have a very clear process for how you're going to close it to make sure that those accounts don't stay out hanging out outstanding.
                                  Now, in conjunction with closing some credit reports and credit accounts, you need to open new accounts. If you have a joint bank account, for instance, well, as soon as you can feasibly close that joint bank account, you should. But at the same time, you're going to need a place to put your money. You need to start opening accounts of your own. I speak with many of you, particularly the stay-at-home parents, but many of you who don't have accounts in your name, it's okay. Not a big deal. Now is the time to start doing that. There's no judgment. There's no problem. You just need to walk into your nearest bank. You don't have to have a relationship with them. You just have to have an ID, it has to be convenient for you, and start opening up your new accounts. Most banks are very accommodating. You just find a place that works for you.
                                  Same with credit cards and credit accounts. I've sat with many of you before and we walk you through the process of getting a credit card. Getting a credit card, there's a thousand different options. You have to complete what can feel like a daunting application process. But oftentimes, you just need to do it. I will walk through with you how to open a credit card account. Or you can do it yourself and just kind of do the research and figure out a credit card that is good for you.
                                  I know people whose families made millions of dollars a year and they got divorced, and one of the spouses never had a credit card before. We were just like, "Hey, let's sit and figure out how to apply for that so that you can have that at your disposal." I know people who don't make very much money and are super savvy in that regard and that isn't an issue for them. But wherever you are, make sure that you have some of the basic financial things taken care of.
                                  Now, shifting gears a little bit, you need to update your will and estate planning documents. As I said, you might need a glass of wine for some of these things. This is definitely one of those topics where a nice glass of wine makes it a little less painful to deal with. Will and estate planning documents. I've talked about this on the podcast before, but estate planning is basically just so everyone knows is estate planning is the process of planning for what happens if something happens to you, meaning if you die or if you're in capacitated. Unfortunately, it'll probably happen to us in one way or another at some point, and so the question is what do you want to happen with your stuff, who do you want making decisions, et cetera, et cetera. There are a lot of questions involved in that that are not necessarily the most fun to think about, but they are important.
                                  I want you to write down these four documents. You need a will, you need a health care proxy, you need a power of attorney, and potentially a trust. These four things can be very useful to you. If you want to find someone who can help you with this, you should look for an estate planner near you. I work with estate planners as well, but you should look for a local one. Many of them have fixed fee packages for the basics. It oftentimes costs a few thousand bucks, but it's essential. You need these four documents. You should certainly be asking about these four documents. I'm not going to get into all the intricacies. There's people who spend 70 years, 50, 60, 70 years of their career just doing these things, so I'm just going to tell you to look them up. The will, the power of attorney, health care proxy, and trust. They can be very helpful to you and they are essential for you after divorce.
                                  Now, if you already have these documents, you need to update these documents. Most of the time when you are married, these documents are written in the context of giving everything to your spouse to manage and to handle, which, while you're married, oftentimes makes the most sense. But now that you are divorced, these things will need to be updated and you need to go through them. Find a local estate planning attorney to help you. It doesn't have to be expensive, but everyone needs to get those basics done, and if you already have them done, to update them after the divorce process.
                                  Next thing you need to do is check the beneficiary on every account. What does that mean? Well, your bank account, your investment account, your retirement account, your pension plan, everything has a place it'll go when you die. You need to make sure that those things are still within your wishes. You might want to give everything to your kids.
                                  Oh, I should also mention something important. As I said about the will, the same applies to some of these financial accounts. Many of these financial accounts default to your spouse when you were married. If you don't update them and something were to happen to you, believe me, it happens every day, your ex-spouse will end up with a bunch of stuff that you had no intention for them having, and it could be many, many years or decades later. Just take care of this thing now. You got to look at every bank account, every investment account, every retirement account, and ask the institution that manages it for the beneficiary designation. That's what the term is called. Who is the beneficiary of this account if something were to happen to me? They will give you an answer. It's a very common question. You need to make sure it's within your wishes. You can make it your children. You can make it friends. You can make it a brother, a sister. You can make it anyone. But most of the time, you don't want to keep it as your spouse.
                                  Next thing on your list. If you haven't already, you should speak with a financial advisor. Now is a great time to get a financial plan together and one that may work well for you. What you do is you find a local financial planner. Now, I have in the archives I think a seven or eight part series only on the financial planner. If you get the quick start guide, which has all the podcast episodes in it, there is a huge multi-hour series on financial advisors because it's a very important topic. You should check that out. But also, you can ask your friends. I'm sure one of your friends has a financial advisor that they work with. They could be local, they could be online only. There's lots of great financial advisors out there that can help you, regardless of your situation. You should find one. Talk to them. Just because you talk with a financial advisor does not mean you have to hire that person, but it's worth having an initial consultation in that regard to see with one or two or three, to see if one of them may work with you.
                                  Finally, speak with an accountant. The year after you get divorced, a lot of things change. What do I mean by that? I mean your tax status changes, you might be moving houses, you might have other things that are changing in your life, and particularly even if you just do it for one year and one year only, this is one of those years where it makes a lot of sense to speak with an accountant in this area and just to explain what's going on, make sure there's no major tax things that you need to be aware of, make sure your life is set up properly. An accountant can really help with that and those things. I strongly encourage everyone, particularly the year after they get divorced, to add an accountant to their team and their list, just to make sure they're not running afoul of any rules and that they maximize their ... or I should say, minimize the amount that they pay in taxes in the following year.
                                  A lot of stuff in there in regards to what to do in between signing a settlement or right after you sign a settlement, but this is very important information. It's a lot of stuff to take care of and think about, but you can do it. It's just step by step. That's what I always say. Sometimes someone will say, "Well, what's the next step?" I'll give them the next step. Then they'll say, "Well, what's the step after that?" Most of the time, my response is going to be, "Don't worry about it. We'll get there when we get there. For now, we got to focus on one step at a time and you knock them out from there." It's not much more complicated than that, but you have to kind of do these things to make sure that you take care of the rest of your life from a financial perspective.
Jul 17, 2018
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Thank you for listening! Find a transcript of this episode below.
 

In this episode, I want to discuss what happens after you sign a divorce settlement. The past month has been one of the busiest I've had in a while and the end of the year is looking to continue down that path. You know, as I've mentioned on a previous episode, the tax laws regarding alimony in divorce change in six months, and so that's creating a lot of pressure for people to get their divorces wrapped up before the end of the year, because there's often tax benefits to both sides, for wrapping up this year instead of delaying a year when the law changes in a big way.

                                    If you don't know what I'm talking about, be sure to listen to episode 170 for some of the details and I'll be discussing it more in future episodes. But one of the things that's happened over the past month or so is that a lot of cases I've been working on are wrapping up, which is a bittersweet feeling for me.

                                    I'm of course always happy that people are finishing their divorce and they get to move on with their life. But also, I feel a little bit of sadness because I get to work closely, closely with you during the process, during a tough time and then, many cases, we part ways and we don't have to speak with each other any more, which is also fine, but I do very much enjoy working with you. It is the nature of what I do.

                                    And one of the things that a couple people have mentioned as their cases have wrapped up and they said, "Shawn, you don't really speak much about what to expect after the settlement's assigned. What should I be doing?" And I want to provide you some guidance to that effect. Now, of course, it varies for everyone, but I do want to outline some of the details of the divorce process once you have that settlement signed.

                                    Most of you are going to go through the process where you negotiate a settlement and you sign the settlement, versus where a judge makes the final decree in terms of who gets what. Now, some of you do have to go that way, particularly in the tough divorces, but I expect most of you will be negotiating and signing some form of settlement.

                                    And so what does that look like? And then what do you do afterwards? What kind of things should you be thinking about after divorce? One other thing I want to bring up is I have a, I think it's a seven or eight part series on choosing a financial advisor and financial topics you should know after divorce in the quick start guide. It's in the store. It's part of the full archive of the podcast. That might be something for you to check out because that is some critical information.

                                    I mean, it's hours of information just of like basic financial concepts, how you choose a financial advisor, how do you know what to look for, how do you make sure you make the right option? But anyways, one of the things I want to talk about is, so how does the settlement process wrap up and then what do you do afterwards?

                                    Now, for some of you, your settlement process actually might occur in two phases before you get to the settlement agreement. There's the part of the settlement that I might call the term sheet, which is ... in this part of the settlement, you outline basically everything that you want and your spouse wants on a sheet of paper or a few sheets of paper, without really legal terminology in there.

                                    The way to think about the term sheet in a way is like, if you ... and I've had some clients do this, if you and your spouse, were to negotiate by email and you say, "I want this house," or "I want the house, you can keep this car, I want this car, we're going to split custody in this way," but you just go back and forth by email.

                                    And then you say, alright, here's the final email with everything that we want. And you say, okay, good. That's the kind of the term sheet part of it. And what you do with that term sheet, I call it, because that's what you use, that's what you call it in the investing world. You say, all right, we have a term sheet, let's make it legal.

                                    And so the term sheet is here's all the details that we've agreed to, and then you take it to your attorney and say, "Can you please draw this up in the appropriate legal framework so the court can sign off on it?" And so, for some of you, that's the first phase. Now, not everyone goes through that step of negotiating a term sheet first. Some of you go straight to the actual legal settlement document.

                                    In which, you're going to get to this document in one way or the other, but sometimes it's just depending upon your process, you go through the term sheet phase first. But when you get to the legal documentation, this is when the attorney drafts up exactly what each of you is getting.

                                    And the legal documentation, you're going to really want to pour over every word, every phrase, every sentence in this document to make sure that it not only matches what you agreed to, but also is what you want. I've seen cases where people sign settlements and they don't read it closely and you go back a few months later and you look at it and you're like, "What did that paragraph mean?" Or, "That's not what I wanted it to say. I thought it was supposed to be this," and that can easily be avoided by studying your settlement in the first place.

                                    And let's just say you've gotten through those two phases. So you've got your term sheet, you've gotten a settlement and everything is wrapped up and you submit the paper to the court. That's an important step three, remember, just because you signed the settlement agreement ... This is an interesting topic that I actually will get into now; I didn't anticipate talking about it now.

                                    So depending upon what's going on, you can sign and agree to the settlement agreement and sign it, have everything done, but not submit it to the court. And if you don't submit it to the court, you will never be divorced. But there are reasons sometimes that you might not want to submit that settlement agreement to the court and you might want to delay. Now, there's many moving parts when it comes to delaying, particularly with the tax law changes and other things.

                                    But, if you wanted to delay, you can, and I'll give you reasons that people delay that come up pretty regularly. One is for tax purposes for filing jointly. So let's just say, you know, we're getting to the end of 2018 as I record this and, you know for tax purposes or you think for tax purposes, you want to file just one more time as a married couple because it makes sense for you. I know plenty of people who will negotiate their full settlement, sign the paperwork and not submit it to the court and just say, "Hey, we'll submit it to the court in 2019," the next year. Because for tax purposes, it'll save them many thousands or tens of thousands of dollars.

                                    I've had some lesser common reasons, so one of my favorite reasons, I had a client who I'll just say lives in a town with one golf course and in order to keep their membership active at the only golf course in town, they wanted to stay one more year on the married membership because as soon as they became a divorced couple, they would be doubling their membership dues.

                                    And if you know anything about golf courses, those dues can be in the tens of thousands of dollars. So to save one more year playing golf, they decided to save some expense. They decided to keep their membership, or themselves divorced, or excuse me, I should say, let me restart. They kept themselves married until they renewed their membership as a married couple for one more year, so they could save up the extra money for the golf course and the increased golf dues they were facing.

                                    There could be any number of reasons that you may want to delay your divorce. And so, some people may do that, but you also need to keep in mind that if you have not submitted the paperwork to the court, you cannot get divorced and you should not be making other major financial decisions until you know exactly what is planned. And I'll give you an example of why that's a big deal.

                                    I have a client who needs to ... I actually have several people in this category, who need to refinance their home. And as part of the refinancing process, the first thing the mortgage lender says is, "Hey, where's the paperwork that says you are divorced?" And so, they will ask for, that court signed, judge signed, county signed document that says I am officially divorced before they can make any major financial moves.

                                    But let's say you submit the paperwork and you have everything in the court and everything is good to go. What do you do? Well, you wait. Unfortunately, just because you've signed the paperwork, just because you submit the paperwork, still doesn't mean you're divorced. And depending upon where you live, it could still be many, many months before you are divorced in the eyes of the law. I'm going to give you an example.

                                    I spend a lot of time in New York, in New York City, and have several clients there. Some cases, this is crazy, even as I think about explaining it, you can file for divorce and submit the paperwork in August, so the eighth month of the year, and I'll tell you why this is relevant in just a second. We can file the paperwork then. You can get through the end of the year and not have official divorce paperwork.

                                    I've had cases where someone files paperwork and August and they don't get the divorce paperwork until February or March of the next year. And because the New York court is so backed up and there's so many cases and not enough judges and not enough resources, unfortunately, in many cases, that it takes the court six months or can take the court six months to officially recognize the divorce.

                                    Now, of course, they know that they'd be causing a lot of trouble for people if the divorce didn't go through until February. What happens is the New York court is so busy and they understand how much turmoil that could cause is they will backdate the divorce papers oftentimes. So if you file for divorce in August and they don't get to it until February, they'll say, "Hey, sorry, we just got to it. But because you filed it an August, we're going to consider you legally divorced as of December 31st of the previous year."

                                    But the point is to bring up is that just because you filed the paperwork still means you need to wait. And from a practical perspective, you've just gone through a very intense process. And even though it's not over yet, one of the first things I recommend you do is you wait.

                                    No need to rush into major decisions. Right after you file the divorce paperwork and you submit it to the court. First thing I say is breathe. Relax. Take a week or two. Focus on yourself, focus on your kids, your family, your work, whatever you've been neglecting during this process. Now that you've gotten this major step involved, take some time to get back to normal or to prepare for the future and don't make any major decisions unless you absolutely have to. If you take some time to breathe, you will get into a position where you can think clearly about the next steps of your life and the next phases of your life and get organized and prepare for the things that we need to do and that you will need to do as you go forward.

                                    Once you've taken some time to breathe, decompress, relax a little bit. I want to cover two main areas that you're going to need to focus on going forward. I'm going to cover these in the next episode. The first thing you're going to need to do is you're going to make sure that you get and give up everything that you agree agreed to as part of the divorce process. And the second thing you should do is update all of your accounts to make sure they reflect your new reality.

                                    Stay tuned for the next episode. I'm going to get into those very soon and get into some of the nitty gritty details of what those two things mean.

 

Jun 27, 2018

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Thank you for listening! Find a transcript of this episode below.

 

In the previous episode I gave you a high level overview of a balance sheet and if you haven't listened to that episode, be sure to go back and hear it because the balance sheet is one of the most important documents that exists in divorce, so I want to make sure that you get it and you understand the key details of the balance sheet. It's so important as I said in the previous episode that it's something that I update every month and have for many years and probably will continue to until, for the rest of my life. It's that important of a financial document to keep track of.

 

In this episode I want to discuss a little bit about specifically how you prepare a balance sheet and how you go about it. If you were going to prepare a balance sheet from scratch, how would you do that process? What do you need to know to prepare your balance sheet? Well, one thing I'll say is a balance sheet easier to produce when you ... it's easier to produce when you a computer specifically if you use Microsoft Excel. You don't need to be super fancy at Microsoft Excel, but if you know the basics of adding and summarizing columns, over the long term it's a much easier method to do. That said, you can do your balance sheet by hand on a couple of sheets of paper. If you have good handwriting and a calculator and you can keep things organized. That is a very legitimate method and people ... I'm a firm believer in doing things by hand.

 

I still have a lot of old schoolness in me, even though I run basically an online business, but some things like a balance sheet I still do by hand all the time. Particularly if I don't feel like updating every number, but just want to get a sensor if I'm in a meeting with a new person, I can just pull out a sheet of paper and say "Hey, let's just go through the balance sheet and we can put it together on a slider of paper just like that", but in even case you're going to want to have a calculator and what you should do if I were going to create a balance sheet from scratch is I would think about all of your most valuable things.

 

What are you most valuable things? Oh, I forgot to mention something important. One thing about a balance sheet is that a balance sheet is a snapshot in time, so the numbers on a balance sheet, you know I said I update it all the time, well whenever I update a balance sheet it's as of that particular day. In divorce situations usually you prepare your balance sheet as of the date of separation, but you can always update the time periods related to the balance sheet, so you have to pick a day. So that day might be June 1st. That day might by October 22nd of the previous year. That day might be today. Whatever day you pick is the day that you're going to value all of your accounts and all of your assets, that's what account balance you're going to use and when that's really important is if you have an investment account for example.

 

Let's just say you're listening to this towards the end of the year and let's just say at the beginning of the year the investment account had $100 in it, but later in the year that investment account made some money and now it's got $120 in it. Well if you got separated earlier in the year, you might have to use on the balance sheet the $100 number even though it's worth a $120. Depending upon your divorce situation, you have make the call as to whether you want to change that separation date. If that's even possible, like that's a big statement I just kind of slid in there, but you have to determine what day is most advantageous for you in terms of valuing assets like that, so you got to pick a day. For me I just pick you know whatever day of the month I decided to open and update my balance sheet, but something that you need to keep in mind.

 

Now when you're preparing a balance sheet, I was saying you need to think about all the stuff that you own. All of your assets, so if you own a house that's an easy one. Almost everyone has a bank account, so you put your bank accounts on there. If you have retirement accounts, you go through each one of your retirement accounts and list the total value of the retirement accounts and if you have a 41K, I usually write down on the line John Smith 41K, so I know what type of account it is and I'll say value, $237,556 and I will make a note as to what date I did it, so if it's June 1st, I'll just put the June 1st date on there and hopefully I said when you do it you keep every account on the same date, but you start with ... if I were to start with the assets.

 

Start with the house because everyone's going to have, most everyone's going to have a house. If you rent then you're not going to list it as an asset, but if you own a home of some kind, then you will put the home value and if you have a mortgage the home is a little bit tricky because you all have debt attached to it, but you have a mortgage also put the mortgage value on there and put if you have a second mortgage or something else, put that value on there as well and that way you can get a total home value minus mortgage and any other debt, so you can start there.

 

Then I say all right, well here's all my bank accounts, so I go through each one of my bank statements. I put in the amount of money that's in there, easy enough and I just list out each account, who's name is on it, so if you're doing it for you and your spouse, you should make a note as to who owns said account. So you do bank accounts. You do your house. You do any investment or retirement accounts, list every one of those.

 

Then you go to vehicles. You put all your vehicles. You can put ... oh other real estates, so I forgot, if you have a second home or you have a rental property or whatever else, don't forget to include that and then think about all of your other stuff. Could be furniture, collectibles, intellectual property, who knows what, but whatever that thing may be, you add it on and go from there and you add them all up. You put them nice and neat into a column. You group them by category and that way you know all of your assets. You take the sum total of all your assets. Maybe it's $100,000. Maybe it's $100 million, who knows. Likely somewhere in between there and you know the total value of your assets and who owns them.

 

Second thing you do is now you got to think about your debts. As I said some of you have debts. Some of you don't. It really just depends on your situation, but on the next side of the page, so if I split it down the middle. I have the left side with all my assets, the right side of the page with all my debts and so you list out every credit card you have or if you have a student loan, you list out a student loan. Or, if you have a personal loan that you have, you write that in there and you would go from that point and start working on your debts and you list them all out and you summarize your debts. I'm just going to use some basic examples.

Let's just say on the left side of the page, I like using $100 because everyone hopefully can follow $100 math. Let's say you have $100 of assets in between your houses and cars and retirement accounts and everything else. Let's say you have $20 of debt, what does that make your net worth on your balance sheet? Well your net worth on your balance sheet is $80. You're going to take all of your assets subtract out your debts and you're going to end up with a net worth of $80 and then you're going to have your balance sheet.

 

Now one of the things that's very important is making sure you attach the right value to the different assets and debts that you have. What do I mean? Well one thing I ask everyone. I will ask 100% of you when we prepare a balance sheet, how did you come with the value for your home? If you went to Zillow and said "Hey I typed in my address and Zillow said it was worth $357,000", I will say "Okay, thanks" and we may use that value for now, but I will say we need to get an appraisal to figure out how much this house is actually worth or I'll say you need to talk to a real estate agent to determine a much better value for this house because Zillow is not the most accurate place to go.

 

If you have a car and you have a 1997 Mercedes E300, I don't know if they may an E300 in 1997, but if you had bought that car in 1997 that would have been a $60,000 car. If you list that asset as $60,000 in 2018 when I'm recording this, I will say "Hey, you know that car was worth $60,000 something then. It may sadly only be worth $3,500 now", so we need to make an adjustment there and so you need to be cognizant of the actual values for certain accounts. Bank accounts are easy. You'll align again, you'll get the number on your bank account and you're good to go.

 

Same with investment accounts, but for any assets that don't have a clear value like homes and cars and jewelry, we will need specific appraisals for those types of assets, so just something to think about in that regard and then as I said, once you prepare your balance sheet what happens next?

 

Well you have to understand the information. Look at it. Make sure it all makes sense. Ensure that it meets your expectations or maybe there are some surprising things in there, which happen. The second thing is you have to really internalize your balance sheet, particularly when you're going through divorce and you have to think and what assets are most valuable for me to keep, or what do I want to keep? What assets do I not want to keep? What do I want to give away? How do we handle the debt situation?

 

So I've worked on many a client who had debt and we had to write in the divorce agreement we're going to sell you know if I were just going to toss out an example. Let's just say "Hey we're going to sell the house, the proceeds are going first to pay off the outstanding credit card debt" and then second whatever remains after we're going to split between us 50/50. That something that we start thinking about, but we got to start thinking about "Hey, what's the best settlement that we can get for you in that situation?" I'll give you a case that I've been working on lately where there were a lot of real estate properties, but in this situation the person who was determining their settlement wanted all the real estate, but they were going to be left with zero dollars in cash, which is not a good position to be in and I said "Hey, I understand that you're going to have all this real assets, it's great, but you're going to need to have some cash in a bank account" and so, while you might want to keep all these real estate assets, maybe left's find a way for you to get either from a retirement account or something else, some day to day funds that you have so that you can live your life normally and plan for some expenses that you're going to have after the divorce process is over.

 

You don't want to be real estate rich and cash poor. That's not always the best position to be in depending upon your life goals and what your immediate needs are and this person had some tuition payments coming up and so they were going to need the cash one way or the other. Trying live off the cash from the rental income plus save up enough for tuition, it just didn't make financial sense and so, that's one of the listings that we can look at. If you remember the previous episode I mention that we split up the assets and we said there's $100 in assets total and one spouse is getting $80 in assets, the other is getting $20 in assets. Well if you look at the balance sheet you can start to figure out, well maybe that actually makes sense given their situation or maybe that's a terrible deal and we need to make some adjustments, but when you prepare your balance sheet correctly you can quickly and easily identify all of the things that you need to know in a very usable format.

 

The balance sheet is meant to be a very simple asset and simple analysis I should say for you to review and have a clear picture of how your finances will look and so you use it all the time to understand hey, if this scenario happens and we adjust the balance sheet, does that leave me in a good position? That's a lot. The balance sheet I could talk about for a lot of time and the ins and the outs and it's actually one of those things that differs so much between each individual person. It's hard to sometimes cover all the different nuances of a balance sheet, but you know if you Google balance sheet you'll find some details on it yourself, but I want to give you just an overview of kind of what it is and how to start thinking about it and how you can prepare yourself on a sheet of paper and it's something that should be at the forefront of taking control of your life both during the divorce process and afterwards as you go through this time and as I said, it's something that we work with with 100% of the clients that I get to work with as we prepare that balance sheet so you always know where you will stand financially during and after the divorce process.



Jun 14, 2018

Visit us at divorceandyourmoney.com for the #1 divorce resources in the United States and get personalized help. Learn about coaching services here.


Thank you for listening! Find a transcript of this episode below.


We're almost 200 episodes into the Divorce and Your Money show. There's a lot that I've covered, but there's still a handful of topics that I haven't gotten a lot of depth on. Sometimes you might notice that there's a little bit of a gap between recordings, and that's actually just simply because I'm working with you. So sometimes, particularly on busy weeks or sometimes busy months, I don't always get to record a ton of helpful episodes. But in this one, we're covering one of the most important topics that I can't believe I waited so long to cover.


This is something that ... This topic is something that we do with 100% of the clients that I work with on the ongoing coaching packages. Now, in a coaching call we can't do this topic, but anyone I work with longer term throughout their divorce process, we start by what we're going to cover in this episode. And, I realized I haven't really explained it in depth to you and why it is so important. Actually, what we're going to talk about is a financial document that is so important that I do it myself and check mine every month. For you, we'll do it every time something happen in the divorce process. For some of my clients who I work with after divorce is over, we do it for the foreseeable future every quarter or every half a year to make sure that everything is on track.


This is to me perhaps the most important financial document that exists, particularly when you're thinking about the divorce process or even the rest of your life. And what is that? It is a document that we call the balance sheet. A balance sheet, if you work in the corporate world, has to do with .... Every one of your companies, if you work for a company or if your spouse works for a company, prepares a balance sheet or at least they should be. Basically what's on that balance sheet is all of that company's assets and their debts at a certain period of time.


What we do is we take that same concept. So if a company owns a building, for example, an office building, well, that office building gets recorded as an asset on their balance sheet. Well, let's say that company has a loan from a bank. Well, that gets reported as a debt on that balance sheet. Basically, what a balance sheet does is it tracks the value of a business over time over specific periods.


Well, one of the things that we do in the divorce context is take the explanation or the utility of a balance sheet in the corporate world and apply that to your personal finances. So, we do a personal balance sheet. That personal balance sheet summarizes all of your, either individually or as a married couple, all of your assets and your debts and puts it into one handy page. Basically we take all of the stuff that you own, could be houses, could be cars, could be furniture, it could be jewelry, could be other valuables, and we put ... It could be retirement accounts. We put all of that on a page, and then we take a list of all the things that you owe. It could be a mortgage, could be credit card debt, could be a personal loan, could be a student loan, could be some other ... could be tax payments that you have that are outstanding. We put those on the other side of the page.


Basically, what we're trying to figure out is two things. One is what does your total financial picture look like? Just very simply is if we put everything on one page, what does it look like? Then, second is as we're going through the divorce process, how do we make that as people are negotiating different settlement options and different settlement proposals, well, how does that adjust your personal summary and does that leave you in a position in the future where your personal assets and debts are in a good spot? And I'm going to get into those questions a little bit more later, but I want to talk a little bit more broadly about the balance sheet.


As I said, basically it's just all the stuff that you own and all the stuff you owe. Some people I work with don't owe much. So actually, you might have nothing on your owe side of the balance sheet. But what you do know is if you have everything you own and you add it up and every ... minus, everything that you owe, you have your total net worth. It is basically like ... Now, be very ... I'm gonna have to clarify my language with my next sentence. A balance sheet is basically like your statement of net worth with a big but. The statement of net worth or the financial affidavit that you complete is usually directed in the form of a court document or a particular format that your attorney uses.


Unfortunately, while that document is useful to start gathering the information, if you ever look at a financial affidavit or statement of net worth, they're not very usable on an ongoing basis. They are a legal document. So what we do with a balance sheet, and why it takes a lot of time to custom create these for each one of you when we work together, is we take all of that information and put it onto one or two pages so that you can easily see a quick and clean snapshots of your assets and your debts on one page. That way we can see your net worth in an immediate snapshot.


That's very important because when you look at a ... I'm going to take the New York form because I have a lot of clients in New York and one of the ... If you ever look at the New York financial affidavit, the New York statement of net worth form ... I did a calculation one day. I went and added it up because I was curious myself. There's something like, if I remember the number correctly, somewhere around 170 different individual line items that you have to go through on your New York financial affidavit.


Well, most people, even those with a super complex financial lives do not have 170 different line items that they need to keep track of. Really, the most that most people have is about 20 to 30 things in terms of accounts, and assets, and debts that we need to keep track of. If I had to just guess on average, somewhere between 20 to 30 things. Some people have a few more, some people have a few less.


But what we do is we take the 20 to 30 most important things. Sometimes if they're smaller items on there, we just lumped them into another category. But we just take those key items, put them on one sheet of paper that's easy to read, group them by asset type. What do I mean? So if you have five bank accounts, we put them into the cash grouping. If you have three retirement accounts, we put them into the retirement account category. If you have a house we might put it on its own, particularly if you have a mortgage or two. We might put just a house or a real estate category.


Ultimately, you're going to have one sheet of printer paper that says here is all of your assets and your debts. It's very clean, very easy to understand. 100% of people find it useful. And as I said, it's something that is so important that I do my own balance sheet myself every month just to make sure that I am on track and to see how things are changing. And in the divorce process, it's exceptionally important because you get to see on one clear page where all of your assets and your debts are, how much they're worth.


And what ultimately happens is, as I was alluding to earlier, as you get to start to evaluate different settlement proposals, you get to see. So what we'll do is we'll do, you know, assuming you're a heterosexual couple, which is most people that listen to this, but not all, you will have a husband side and a wife side. On the husband side, there'll be a settlement proposal on the table. I don't know if you're the husband or the wife, depends on who's listening at the moment. But we'll put here's what's proposed for the husband on one side, here's what's proposed for the wife on the other side and we'll look.


I'm going to use some simple numbers for the sake of discussion of the balance sheet, but let's just say there's a total pot of $100 on assets. Well, if the husband is getting $80 in assets and the wife is getting $20 in assets, we might say, "That doesn't look so fair." But, actually, maybe it does. Because what if, you know, the ... But or maybe we'd say, "Actually, that is fair," and there could be a reason for that because the wife in this situation, even though she's getting $20 an asset, or an in assets, and the husband's getting 80, maybe the husband's unable to work and so he needs extra assets to live on, whereas the wife is going to have a bunch of income down the line. Or maybe this is the way that they structured a lump sum payment instead of paying ongoing support.


But, you can see that immediately when you have a balance sheet. It gives you an instant ability to understand, "All right. Here's my financial picture and here's what it's going to look like after the divorce, assuming we go through this proposal. Looking at this proposal, I think it's fair or I think it's not fair, and we need to make some adjustments or whatever." Then, after the divorce is over, you can keep updating your balance sheet every few months and you can say, "Hey, am I adding to my savings or subtracting from my savings? Are my investment accounts going up or are they going down? Is my house worth approximately what I thought it was?" You can keep refining these things to know how you're doing financially. That is the short, short introduction to the balance sheet.


So what I want to talk about in the next episode is some of the mechanics of the balance sheet, and really how do you make your own balance sheet. It's something that I do with all of you all of the time, but one of the questions is also always, you know, how do you do it yourself. I do have a handful of clients who've actually already prepared their balance sheet before I work with them, and I want to teach you the important stuff and the important elements of the balance sheet because it's going to be very useful for you going forward.


And you know, even if you don't do it yourself, you say, "Hey, Shawn. I want you to do my balance sheet," or, "Hey, other local certified divorce financial analyst. I want you to do my balance sheet," or if you find a financial advisor you like just in general that you want to work with after the divorce process over, say, "Hey, can you prepare a balance sheet for me?" even if you don't ultimately do it, you need to understand what's going on behind the scenes, or at least I would like you to understand what's going on behind the scenes so you understand why this is so important to me and why it's something that can be useful for you for literally the rest of your life. So, make sure you listen to the next episode coming out in a couple of weeks and stay tuned.

May 17, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the United States and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
Depending upon your situation, you may be in a position where you don't have much credit. And what is credit? Credit is, at least in this country, it's a concept that ... it determines whether or not, or how trustworthy you are in terms of receiving a loan, and a loan could mean many things. A loan could be something like an actual credit card, a loan could be a mortgage, a loan could also be a promise saying that you're going to pay your rent. That's a form of a loan.
 
Credit in the United States is a very important concept, because it affects a lot of things in your day-to-day life, and oftentimes you may not realize it. Let's just start with a simple example of why credit's important. If you're trying to get a new home after divorce ... I know some people who are trying to get a new mortgage or are trying to rent a home after divorce ... well, one of the first things that anyone is going to do, unless you have all the cash upfront, and most people don't, one of the first things people are going to do is they're going to ask you for your credit score, and they're going to ask you how your credit profile looks, to see if they're willing to extend that mortgage to you or if they're willing to rent you that home or rent you that apartment. They're going to check your credit to do that.
 
Another situation is if you need a credit card. A credit card can be very useful. Even if you have the money to pay for things, a credit card can be helpful for your daily spending, and you pay it off each month. Or if you need to get a car loan. These are all things that depend upon your credit, and every person, if you have credit, is assigned a credit score, and they have a credit history that these different financial institutions or lenders will be looking at. But when it comes to the divorce situation, many of you might be in a position where you have very limited or no credit history, which creates a challenge.
 
The weirdest part about credit in this country is that it's a chicken and the egg problem, is that you need good credit to qualify for a lot of things like a home loan or qualify for a good credit card or qualify for rent, but to qualify for those things you have to build up your credit and your credit history and credit report. I know some of you, if you did everything in your spouse's name, might not have that detailed credit history, might not have had a credit card in your name, might not have had an auto loan, might not have had many of those things that, unfortunately, in this country are very important for your credit. And so when you're in the divorce situation, it is now your time to start setting up these important accounts, and that also even extends to setting up your own bank account. While it's not specifically a credit thing, it's just as essential and closely connected to these items.
 
And so in this episode I want to discuss a few ways that you can build your credit, and we're just going to start with some concrete action items. It takes time to build up your credit. I mean, it can take ... There are some steps you can be taking today regardless of where you are, but some of these items will take months and years to generate a satisfactory credit history. But when I think about all things in the long term, you're going to have to start doing it at some point, so why not start now?
 
One of the first things that you should do, outside of ... The first thing you should do clearly is to get your credit report. There are credit bureaus. You get a free credit report from them. It's becoming very common. Or you can go to websites like Credit Karma, but get your free credit report to see what accounts you may have, or if you have none, it'll tell you that as well. But that's a good starting point to figure out what your credit score is, what your financial picture looks like, at least from a credit perspective, and to start building your credit and improving your credit going forward.
 
One of the things that's kind of most frustrating about the credit system is that in order to have credit you have to take out loans. That's not the best thing in the world, but in order to build up your credit, that's basically what you need in some forms. Now, the debt can be short-term, might be just a month or so, and you might pay it off every month, but that's basically what's required for you to build your credit. So one of the first things, after you get your credit report ... I'm going to approach this from a perspective that you have no credit history at all, and I do have some clients that I work with on a regular basis that, even though they have assets and money, they don't necessarily have a detailed credit history.
 
And so we're going to pretend like you have none. If you already have a limited credit history or a great credit history, great. You can skip this episode or listen to some of the other specific things. But I'm going to assume you don't have anything for the purpose of this episode, and I'm going to try and help you get on your feet. And so one of the first things you can do to start building your credit, outside of getting your credit report, one thing you do is you get a secured credit card or a credit card at all. Now, most of the time, if you don't have a credit history, you're not going to be able to get the American Express Platinum Card or the Chase Sapphire Preferred Card, which are some of the better credit cards on the market today, depending upon what your needs are.
 
You might not be able to get that immediately, but you can get something called a secured credit card. Basically, it means you give them some cash upfront, and they hold that cash onto you, and they give you a credit line equal to the amount of cash. So basically, if you were to give them $1,000, you pay them, basically, $1,000, and they say, "All right, well, here's your great credit card. You can spend up to $1,000." Now, you're supposed to pay it off with other funds, but you can spend $1,000, and if for whatever reason you don't pay it off, they're just going to take that $1,000 from you and go from there.
 
Now, the thing about a secured credit card is, it's a great starting point for building your credit. Now, it's not a traditional credit card. A traditional credit card, you don't pay upfront. You don't give them money upfront and then pay them back later, but a secured card is nice, because it reports that you have credit. It's a good way to say that, "Hey, yeah, I've been making payments. I have this credit line outstanding, and I'm starting to build trust." So if you've never had a credit card before, you can look for a secured credit card.
 
Another thing you can try is look for store credit cards. So if you like shopping at an Amazon or a J.C. Penney or a Walmart or whatever else, they all have their own versions of credit cards. You might want to check those places and apply in there. They oftentimes have less stringent credit requirements. And then also, you can do a Google search for credit cards for people with limited or no credit history, and I guarantee you some credit cards will pop up.
 
Now, the downside to these types of credit cards is that, although they build your credit, they tend to have very, very high interest rates, in excess of 20%, meaning if you were to spend, using my example before, $1,000 and not pay off your credit card at the end of the month, they are going to charge you over the span of a year, they could charge you $250 in interest. That's 25%. So you have to be very careful with these secured credit cards and some of these credit cards if you have limited credit history, because they can be very expensive if you do not manage them wisely.
 
The next thing you can do is you can think about becoming an authorized user on a credit card. So if you have someone who you trust, maybe a sibling, that would allow you to be an authorized user on a credit card or something like that, or a cosigner with you ... Authorized user and cosigner are two very different terms. Authorized user just means that you get to use someone else's credit for a credit card, but the person whose primary name is on the account is the person who is responsible for that card. A cosigner is a little bit different, in the sense that both people are equally liable for what happens on that card or on that loan. But in any case, you can try and become an authorized user on a card, or better yet, become a cosigner. Both require the person who is providing their name to really trust you, but it is a good way to start building your credit history, and you can get joint credit cards in those names to start building your credit.
 
Maybe you can try an auto loan. Another way to build credit is if you need a new car ... "new" doesn't mean necessarily the latest edition car, but if you need a different vehicle, you can try getting an auto loan. An auto loan, while it might not be the top tier auto loan, might be more expensive than traditional auto loans, if you're paying your auto loan on time ... Maybe you have to pay a bigger deposit upfront, which might happen, but they may allow you to get a loan, and as long as you keep paying that loan on time ... I forgot to mention this earlier, is what happens with all of these credit accounts, whether it's a credit card, a mortgage, an auto loan, all of these accounts get reported to the credit agencies. There's three big ones. If you just look up credit bureaus online, it's a subject for another time. I also have some other episodes in the archives about this subject.
 
But it gets reported and says, "Hey, John Doe or Jane Smith has this credit line," and each month they'll say, "Oh, he or she's been paying it on time," or "not been paying it on time. Here's their average balance, and here's the credit score we're going to calculate for them." An auto loan could be a way to start building your credit, and so long as you're paying the loan on time, then there are many car dealerships that are used to working with people with very limited or bad credit, and they can find creative ways to make sure that you get into a car. And so long as you keep making your payments, then you can start building your credit, and the more you build your credit, the more you will be eligible for other things down the line.
 
A cell phone plan. Getting a cell phone in your name is also a form of credit. Oftentimes, the cell phone companies will report your credit numbers, and that can be very valuable to you. You just make your cell phone payments each month, and they will report that information to the bureau. Here's an example of how credit is used all the time in the cell phone world, is most people don't actually go to the store and spend somewhere between 500 and $1,000 on that cell phone and then walk out of the store. Most of the time, people are spending ... they might have a plan where they pay $25 a month until that phone is paid off.
 
Well, that $25 a month is a form of credit, and that's how a lot of people can keep up with the latest generation phones, because they're not spending $1,000 in the store. They're spending the $25 a month for however many years until they've paid off that phone or until they trade it in for the next model. That's a form of credit.
 
Another thing you can check is look for a personal loan, get a small loan amount. There's lots of peer-to-peer or personal loans companies available for people to start building their credit. Now, the big downside to a personal loan is that oftentimes the interest rates can be super-high, particularly if you don't have credit, but it is a way to start that process.
 
Now, when you go through all these ways to build your credit, you gotta be careful. You don't want to have a bunch of debt outstanding, but you do need a little bit of credit to be able to get more credit and be able to live your life and function normally as you would often like to, or maybe as you were before, except now things are in your name. And so one of the things you gotta be really careful is make sure you don't borrow more than you can, and don't leave outstanding balances. So if you have a credit card that gives you $1,000 of spending, well, make sure that at the end of the month you actually pay that $1,000 back. Don't keep that $1,000 outstanding and start paying that really high interest rate I mentioned before.
 
Don't miss payments. You know, if you have a payment due on the 23rd of the month, make a calendar notification that it's due on the 23rd, or better yet, set up auto billing, so that automatically those payments get taken out. Even I had to set up auto billing, because I have different accounts and things like that, and then you'll go three days and start getting a bunch of phone calls, and you're like, "Why is Chase calling me?" It's like, "Oh, well I forgot to make my payment on time, just because I was busy, nothing else." And so I switched to auto payments, so automatically they just pay the balance each month, and I don't have to think about it.
 
And also, don't spend too much. You know, just because you have the credit doesn't mean that you have to use it. So if someone gives you a credit line for $1,000, you don't have to spend $1,000 each month. You might just spend $100 of that 1,000 on groceries, and then pay it off at the end of the month, and that is just as good for you as you build your credit.
 
These are some things for you to think about, particularly if you have limited credit in divorce, and you're trying to get back on your feet. The sooner you start these things, the better. You don't have to wait until after the divorce is over. You should start these things today, and start building your credit, building your profile, and start getting to a position where ... This is one of those things that's a long-term process. Your credit's going to be with you for the next decades, and so the sooner you start with this process, the better off you'll be, because it's a slow process.
 
And so even if you have a lot of other things that you're trying to figure out, spend some time. I have applied, I've helped people apply for credit cards, where we get on the phone together or we go on the computer together, and we teach you. We go through what you need to put in for the different line items so you get approved for a credit card, to make sure that you start getting your credit. Or we'll compare credit card offers together, so that you start making the right decisions and start getting yourself in good financial shape, both during the divorce process and as you go on with the rest of your life.
 
May 2, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
In this episode I'm going to discuss an important topic that I don't hear discussed very often. We're covering what jobs can you get when you have limited experience in the workforce. The reason I bring this topic up is because I have had a lot of discussion about this subject on coaching calls for the last few months and I think that it would be very helpful to talk about some of these things in the podcast.
 
This topic, excuse, me is much more important than many people think and for two particular reasons. Reason number one, if you are facing divorce and you might not have worked during the marriage, maybe you were taking care of the kids or doing other things, one of the big questions is what jobs can I find after divorce that might pay me a decent income so I can get on with my life. I want to give you some ideas in this episode of some jobs that actually pay pretty well. Now, you might not be making six figures on day one but you can make a decent salary.
 
Now, the other reason, reason number two that this is an important topic has to do with all of you on the other side of the equation, which is if you are going to be the person paying support particularly spousal support or alimony, one of the very important things you should be thinking about and trying to negotiate is what jobs your soon to be ex-spouse could obtain.
 
What's important about this because if your spouse, your spouse may not have worked during the duration of your marriage. Might be five years, might be 20 years or more or anywhere in between. If your spouse didn't work that's very understandable for a number of reasons. If your spouse has skills or has the capability of getting a job, even if that job only makes $20,000 or if it makes $50,000 or makes $100,000 or more. Well that money you can oftentimes subtract from the spousal support burden that you would have to be paying that spouse.
 
So, let me crystallize it for you very simply to make sure that that point is clear. Let's just say I'm going to keep the numbers very simple, but these might be higher for some people or lower depending upon who's listening. Let's say that you have to pay $50,000 a year in spousal support to your soon to be ex-spouse. Well, if you know that they can make $20,000 in income, be it as a teacher or an assistant or any number of jobs I'm going to talk about in a bit, well you can request and negotiate that instead of paying $50,000 a year in spousal support, you only pay $30,000 a year. That can be a substantial substantial savings to you.
I want to stay on this point for a bit before I get more into the jobs. Even though many people listening might not have an extensive work resume, if you are or if your spouse is of solid physical and mental functioning, there are a lot of job opportunities out there when you put your effort in. One of the frustrations that I hear from a lot of people is that they'll say or particularly people about to pay support is they'll say one of two things. Either they'll say that my spouse didn't work and so I have to pay them more. That's partially true. They'll also say my spouse doesn't want to work.
 
Well, if your spouse doesn't want to work and you're going to have to pay them support, you know, most people don't want to work. We would all like to have a permanent vacation or hang out with our friends or just raise our kids exclusively. Unfortunately in divorce situation you may have to or that person may have to realize that they now need to work.
 
One of the things is that there are often jobs available for them. Another thing to think about is that there are people called vocational experts and if you go to episode 164 of the Divorce in Your Money podcast I discuss that in depth as well and that can be a great source for you. If you're looking for a job you can go speak to a vocational expert but also if you have a spouse who's capable of working but maybe has some skills and could find a job, well, you can present to the court or to, as part of the negotiations, you can present how much income they could be making given their experiences. That could directly subtract from the support that you may be thinking about paying.
 
Now, I could talk about this topic for a long time and I am going to get into it quite a bit on this episode but I could stay on this point about vocational experts and jobs. It even surprises me the range of scenarios I see every day as I get to work with you in terms of who wants to find a job, who doesn't. I have some clients who have never worked before who are very ambitious about taking control of this process. I also have clients who were the earners and their spouses were trying to figure out well what kind of job could their spouse who might not have ever worked before, what kind of job could they get and how much could that be and does it make sense given their situation.
 
Anyways, what kind of jobs are we talking about? The point of this is to discuss jobs that don't require a lot of experience. I know that oftentimes one person may have just graduated high school and that was it. Then they raised the kids, took care of the family and that's the extent of their work experience is just a high school diploma. Others may have graduated college, maybe worked a couple years, anywhere in between, or were on the path with a successful career but chose to stay at home with the family. This applies believe it or not with both men and women.
 
I deal with a ton of women who were the earners in the family and the father stayed at home. They're the ones without the extensive job experience. So it applies to most families that I see and get to work with. I'll just say many families that I get to work with and people I get to work with during this process.
 
The question as I said what are the low paying, what are the limited experience jobs that pay a decent salary? I'm going to go through some job ideas and these jobs I know can pay you between 25 to 75 thousand dollars a year even if you don't have any experience. This means day one you're starting with a decent salary. There's plenty of articles online about some of these things as well. So you should look for high paying jobs or take some job quizzes if you don't know which one of these is going to fit for you. There's tons that I'm not even going to get into or get into with any depth that have a lot of opportunity within them.
 
So, let's jump in. I'm going to just jump into different ideas. I want to provide some ideas and some thoughts on different careers that you may need to think about or keep in the back your head because the job requirements are you show up and do the job, you don't have to have specialized degrees in many cases. The first category is assistant. Assistant, I'm going to break down to several subcategories because assistants can apply to a variety of fields. You can work as a public relations assistant. You can work as a legal assistant in a law firm. You can work as a medical assistant. You can work at any kind of administrative assistant if you have that type of skill sets.
 
Actually, when you think about an administrative assistant in the more general category of assistant, a lot of those jobs are work from home. A lot of those are part time and that's actually what I use. I have work from home and part time assistants and that works very, very well. They get to work flexible hours and I don't always have a full time staff person because I don't always need a full time staff person or at least in terms of the assistant categories. So it works for all of us very well. So, that's a great job to think about that almost anyone can do.
 
Real estate agent. Now real estate agent requires a license in every state but usually obtaining the license is not overly burdensome. There are depending upon where you live in the country, it can be in exceptional opportunity. One thing about real estate agents is if you have a good network, you can generate commissions on sales and that can provide a very substantial income boost for you.
 
Another area speaking of commissions and sales is salesperson. Now salesperson can apply to literally any industry that exists. Every business has sales. You can do it for any type of company. It can be a local business, it can be a national company, it can be anywhere. If you have the ability to sell a product from Tupperware to cyber security software to cars to houses to furniture to absolutely anything, you will have have the ability to have a sales job.
In fact, I am going to toss this out there for the listeners, if you are an excellent salesperson, I have a job for you. There is always opportunity in the sales world. Now, you have to be able to do it, it's not a free job offer but if you are good at sales I always, always and will for the rest of my life have a job opportunities for great sales people. So if you have that personality, that network, that hustle, that ability to generate a sale, there is always a place for you. Those careers can be very, very lucrative.
 
I have friends who sell everything from water bottles very well and make thousands, tens of thousands and some hundreds of thousand dollars on small products like that. I also have friends who sell multi-billion dollar contracts to governments for military equipment. At the end of the day, we're all just salespeople with different products. All right, I love sales so you can see I spent a lot of time on that one.
 
Project manager, very important role. It's sort of a step above if I would say administrative assistant so you might be able to command a higher salary. But also a great part time work at home job or a good in person job if you are someone who is organized and can stay on top of multiple projects. Particularly, if anyone is good at raising kids and if you have multiple kids, these days that is identical in many ways to the project manager role. So you might have that skill set and not even realize it already so that could be a great job for you.
 
Teacher. Teacher is a job that also oftentimes require some sort of certificate or training, but also like a real estate agent is not too burdensome. So teacher can be a great job. Now teaching doesn't pay super high most places on the pay scale. That said, it is a very good job that many people can consider pursuing if you like that. One thing I'm going to toss out, this is just neither here nor there at least in terms of the specific episode, but if you're thinking about the teaching route there is also lots of opportunities in the special needs world which is something that I like to think about a lot. It's not always the classroom, there's lots of great ways you can help in the teaching world if you do your research and figure out where there is a need because there's often a lot of students that are neglected out there that you could certainly make a big impact in someone's life.
 
The next category. City, state and government jobs. Now, this is a super, super, super, super broad category and it really depends upon where you live. There are tons of government opportunities. It could be in your local city government, it could be for a specific department like the water department or could be in the municipal building or could be at the library. Could be something like that. There could be state jobs that are available. Of course if you have a federal government branch for whatever department, I'm recording this near tax time, so for whatever reason the IRS is on the top of my head.
 
If you want to work at the IRS good on you but there are many different government jobs. The Federal Reserve Board is also just a few blocks away from me. That is just a government job, a very cool government job but a government job. And so if you have an inclination or if you're looking for a job those jobs are great, they have excellent hours and great benefits and could be a place for you to work.
 
Then there's always retail and restaurants so you can work at any of the retail stores. There's retail everywhere. I know it's a struggling industry at the moment but there are still jobs available and they will always need help with good people and restaurants as well. I think we all know restaurant jobs.
 
Then there is this special category that I leave for last that is also near and dear to my heart and that is online work. Now this is an emerging category. It's a very important one. If you have any sort of technical skills or an interest in technical skills, an interest in the internet and the online world, 100% of you are listening to me online in part because I love online and the internet world and I think it's very fascinating. If you have an interest in that world there are jobs for you. You can learn.
 
There are tons of these coding schools that exist many of which are very good and you can go to class for three months and the tuition is substantial but not overly burdensome. It's in a few thousand to maybe 10 thousand dollars or maybe 15 thousand dollars. But, over those three months, they teach you all you need to know about coding in a particular area and most of the schools have partnerships with employers and you can get jobs in the 60 or 70 or even higher range after just a few months and a few weeks of learning coding skills.
So if you have any inclination in that world and you like computers and I actually have, I know some of you from working with you, particularly those who live out in California certainly are inclined or are tangentially involved in the world but that is also a great opportunity. That's location independent. I get to work with you all across the United States because of the internet and technology and knowing some of the basics that are involved. It is also a great way even if you have no experience, if you're willing to learn and it's something that may interest you, it is an exceptional opportunity out there and there are some great ways to make that work.
 
These were all just ideas. I hope you find them thought provoking, fascinating. They don't require any experience. Basically, you can take someone off the street, anyone, even if they've never worked before and train people to do these jobs. Depending upon where you live in which job you pick and what the opportunity is, you have the ability to make a very decent income after divorce. Or if it is your spouse that you're thinking about, you should be pushing for a, if your spouse has the mental and physical capacity and they're not full time taking care of the kids, you should consider putting this as part of your settlement or discussing that point saying that within six months that spouse is expected to have found a job or however you want to structure it, that's something that we structure in many different ways.
 
Could be a year, six months. Could be immediately but they're expected to find a job and to work and that can substantially decrease your support burden for many, many years to come and save you thousands or tens of thousands or if not hundreds of thousand of dollars in support over a lifetime if you think about these jobs and figure out a way to include these as part of the settlement. Then just for the other side of things, it's a good way to be independent and not be dependent upon your spouse's support check coming every month. Because when it doesn't arrive one month that can be an incredibly nerve racking experience.
Apr 25, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the United States and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
In this episode, I'd like to discuss mediation. It's something like 95% of divorces, roughly, depending upon the statistic that you read, are settled out of court. Mediation is one of several ways you can settle divorce out of court.
 
Now, you can do what's called a do-it-yourself divorce, which means you and your spouse just work everything out yourself, you prepare the papers, submit them to the court, and you get divorced. You could have collaborative divorce, which is an option for you as well, which is a specific divorce process. You can look it up. There's episodes on it in the archives of this show as well. You can do what's just called a negotiated settlement, which is also common, which is where you and likely your attorneys will go back and forth and figure out and reach an agreement. Hopefully a reasonable on, and hopefully in not too much time, and you talk through with your attorneys, and you settle things.
 
And then there's mediation, which could be a part of many of the other options I already mentioned, but it is its own process, and it can help you stay out of court. Actually, in some states, depending upon where you live, they actually have court mandated mediation, meaning before you go in front of a judge or have the opportunity to go in front of a judge, the court mandates you go to mediation in advance.
 
But in this episode in particular, I want to discuss some of the downsides of mediation because, on the surface it, can sound like a great thing to do. I am a big believer in mediation when it works for you, but there are some things you have to be aware of and there are upsides and downsides to every part of the process. Actually, one of the things that I do a lot of thinking about when I get to work with you is are you thinking about things from your spouse's perspective as well? Not because I'm going to be defending or working with your spouse, but if you look at things from his or her perspective, you might be able to come up with a much better settlement that's better for all parties involved than if you only are coming from your self interests and not thinking about what might work for them or what their attorney might say.
 
The reason I want to bring this up in the context of mediation is that on the surface it sounds great. You might have had a friend who went through mediation and it perfectly resolved their divorce, or you may have heard about it or your attorney may have recommended it, or whatever the case may be, but I want to talk about some of the downsides to mediation. But before I get into those downsides, let's talk about what mediation is.
 
I want everyone on the same page and in mediation, now, there are some variations, but the idea is basically you and your spouse and a neutral third-party work things out in your divorce, any sticking issues or maybe all of the issues, to hope to help you get to a resolution. Now, when you go to mediation, there's a neutral third-party, as I said before. It could be a retired judge. It could be a professional mediator. Actually, one of the attorneys I work closely with, he shares an office with a professional mediator, and they have a conference room, and you can see them hashing out days of mediation.
 
So usually who's there, it's going to be you, your spouse, a mediator, and then both of your attorneys, most of the time, and this where we're going to start getting to some of the downsides, but we'll get there in a minute. One of the things that's very important as well is when you go to mediation, or the objective, I should say, is to come up with a resolution to your divorce. Therefore, you should be cognizant and prepared for your mediation the same way that you would prepare for a trial. Now, mediation is far less intense, at least in terms of, I won't say it's less intense emotionally because mediation can be very draining, very high stakes, and there's a lot going on, but it's less intense in the sense that there's a nonbinding process, typically, with most mediations. If it's not working, then you don't have to come into an agreement.
 
Where there's enormous stress involved in the court processes, you have a random judge who cares very little about you in most cases. Nothing against the judges, but if you're sitting and you've been practicing law for decades and you hear every family law story and one attorney creates a crazy story for their client, and the other attorney creates a totally opposite story for the other client, it's hard to really come with an informed decision. You often also have very limited time in the court setting to work out whatever issues you want to think about. And so, when you go to court, the stakes are very high because those decisions are final. I guess you can appeal in some cases, but they come with a lot of pressure. Whereas mediation, you want to come as prepared as you might for a trial, but the pressure level is a little bit lower.
 
But anyways, I digress. I have a tendency to talk quite a bit. It is a podcast, I suppose. But I want to discuss the downsides of mediation. I want to discuss three things in particular that people don't always consider when it comes to mediation.
 
The first is that when one spouse is not participating in good faith. The second is that mediation can be very expensive, and the third is that, I already touched on this a little bit before, is that mediation doesn't replace a judge and mediation is nonbinding. So let's jump into each of those three points very quickly.
 
The first is that what happens if one spouse is not participating in good faith. This is actually one of my biggest frustrations with the divorce process. I think anyone who's dealing with it, the divorce process, a.k.a. everyone listening to this show, you know that a lot of things about it don't seem right. Most of you listening are just trying to get what's in your best interest and a fair settlement and move on, and make sure that you get enough to live a life, the best life you can after the process. But when you start going to mediation, oftentimes we're dealing with, I'll just call, an irrational spouse. The spouse that really is either distrustful of the mediation process or just has such unrealistic expectations that mediation is not going to be productive.
 
Unfortunately, I see it all the time. What happens is usually the person that I work with because I'd say almost everyone who books a coaching call with me understands what's going on. You might have substantial questions about particular issues, but you get the process. You're well-informed, and you get the general gist, but you have some questions or clarifications. You're facing a big decision and you want to know a second opinion or a third opinion, sometimes in my case, or just see if what's in your head or what you're hearing actually makes sense. Well, the challenge in mediation is when you go and you show up to mediation and you show up with your attorney, you're prepared, you know what you want, you're ready for the negotiation, but your spouse is so unrealistic and uncooperative or just doesn't get the whole process, you can end up in a position where, well, you don't get anywhere. Unfortunately, you end up in a spot where the day of mediation is completely wasted.
 
If you know that your spouse isn't going to work with you to try and resolve some of these issues, then you are not in a good spot. You need to really question is is it worth even showing up in the mediation or is it going to be a waste of everyone's time?           
  
Now, the second issue with mediation is that it is expensive. Mediation is not cheap at all. Here's why. When you go to mediation, you usually do it for a day or a half day of a session. Something like that. You book a mediator. So you're paying however much a mediator's hourly rates are. It could be a couple hundred dollars an hours. It could be several hundred dollars an hour for a mediator. And so, if you think about an 8-hour day, you could be spending a few thousands dollars on the mediator alone.             
 
Then you are bringing your attorney. You are now paying your attorney's hourly rates for a whole day. It's not like the 15-minute phone call. It's not like the couple hours to prepare a document. This could be a full day of your attorney's full rate in hourly fees. Not only your attorney, your spouse's attorney. And so, it's you, your spouse's attorney, your attorney, your spouse's attorney, so it's at least five people participating in the mediation process for a day.
Now, if mediation does not resolve itself in that day, and it often does not, you're going to be doing that times many days. I know people and many of you listening could end up spending at least three or five thousand dollars for a day of mediation, but could be many times that. If you have to have multiple mediation sessions, you can look at bills in the tens of thousands of dollars very quickly just from the mediation process. And now, what if you bring your accountant with you? Or what if you bring a business evaluation expert with you? What if you bring a vocational expert with you? What if you bring any number of potential experts with you during the process? Well, unfortunately, that only adds to the bill.
If you're not getting anywhere in the mediation process, and I see it happen, unfortunately, as I said, every day, where people go and they make no progress during mediation and end up spending thousands, if not tens of thousands of dollars, in the process. Well, guess who wins? Not you, but your attorneys and that is the situation.
 
Mediation can be expensive, so you need to be aware of that going in and make sure that it really is going to be fruitful for you.
 
And then finally, the last thing I want to bring up is that mediation is non-binding. You're going to understand that all three of these points are closely connected because mediation doesn't lead to a final ruling. I tell people this all the time when you come for a coaching call. A lot of times, you come for a coaching call and either you're a few weeks out from mediation or it's about to happen tomorrow, whatever the case is, but I'll say like, "Look. You gotta understand that if you're in the mediation room and things are not going your way and you're going towards the approach of a wholly unacceptable settlement, mediation is, generally speaking, non-binding. So if it doesn't look like things are going to go your way, or at least in a reasonable direction that you can live with, you don't have to be forced to sign that agreement in the moment with all the emotions flowing and the adrenaline and everything else going on.”
 
When it comes to the mediation being non-binding, that has the potential opposite effect as well for your spouse, which means that if you're coming to an agreement or you think you're going in a good direction, and all of a sudden, your spouse just says, "Screw it. I'm not that interested in this deal. I don't like it." Well, guess what? You don't come to a deal and that time has been, I don't want to say wasted because it's not always wasted, but kind of. You're not getting that money back.
 
That's a part of the process that you really have to understand. It's different. There is something called binding arbitration, which is used oftentimes in commercial disputes, commercial cases, but a little less common in family law. I don't see it too often. That and those cases, whatever the mediator, or in this case they call it the arbitrator decides, is final, but in a divorce situation, that's not the case. You should just be informed. That's the goal of this podcast always is to make sure that you understand all sides of the issues so that you can make the best decision for you.
 
The three downsides to mediation, again, I'm just going to sum them up real fast before departing. The first is that one spouse may not be participating in good faith. Second is that it can be expensive and third is that mediation is non-binding and it's not like going in front of a judge where a judge's ruling is final. It is a non-binding process and that comes with its own set of downsides.
Apr 18, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
I'm going to start off this episode with quote from Yogi Berra, or at least it's attributed to Yogi Berra, and he said, "You've got to be very careful if you don't know where you're going, because you might not get there." The reason I read that quote is because one of the first questions as soon as a divorce process either hits you in some cases, or if you're planning for it, or maybe if you're in the midst of it already, one of the first questions or one of the main questions you should always keep in mind is, what do you want? What do you really want during the divorce process and after it's over?
 
If we have a coaching call together, it's actually one of the questions I usually ask people on calls, and it's really just to try and figure out, well, do you know what you want out of life? The divorce process is going to be over. So are you making decisions during the divorce process that will help you for the rest of your life? Also, what do you want out of the divorce process itself? So one of the things you should be doing, regardless of if you're about to sign the settlement papers or you haven't filed for divorce yet but you know it's coming, or you're in the middle of divorce, doesn't matter, one of the most important things that you can do as part of this process is really set your goals. When I say set goals, I want to put them into two contexts.
 
Goal number one, or set of goals number one, and I like to make goals pretty simple, so I usually just do three things, I do these myself, I'm not going through divorce, but I do them for other things, like as I think about what I want for the podcast, for instance, I have goals for the Divorce and Your Money Show and how many people I can help. But you set three goals. You put your top three priorities or goals on a sheet of paper and you say, "Hey, priority number one ..." And these are my goals, or your goals in this case, for life. So as you think about, "Well, what do I want in life?”
 
If you are going through the divorce process, most of the people I talk to, let's just say you're 60 years old for sake of discussion, and in good health, statistically you've got another 20 to 30 years of life ahead of you, maybe longer. So you have a whole ton of life to think about. What do you want out of those 20 to 30 years? Or if you are one of my younger clients and you're 30 years old, well, you might have 50 to 60 years. The divorce process is only going to last hopefully a few months or maybe a year or two, but then you're going to have decades of life to think about.
 
As you sit down right now, what are the three things that really matter most to you? Could be something having to do with a fulfilling job or financial security, or something for your kids, or being able to travel, or whatever your life goals are, write those three things down and figure out what kind of future you really want. This is independent of the divorce. You assume the divorce is over and you're just living your life. What does that look like to you? I put those on a piece of paper and I review ... You should be reviewing those goals at least, I think, every day, and I'm going to tell you why in just a bit.
 
The second thing, the second set of goals that you should be putting down is, what are the goals for your divorce? Now, I get to speak with you every day on a coaching call, and I hear a range of thoughts about the divorce process and what you want out of it. Sometimes people will call and they'll say, "I want every asset ever and that's what we're going to do." Other times people say, "Well, I just want this to be over. He or she, my spouse can have everything. I just want this to be over with." Then there's everything in between, where some people say, "Well, I understand, even though of course I want everything, I understand how this process is going to go and I want something that's a fair and reasonable settlement, all things considered.”
 
Well, whatever your situation is, you need to sit down and think, "Well, here are my three divorce goals." Some of the divorce goals might be involving custody arrangements or support arrangements, or debt, or what kind of assets you have afterwards and after the process is over. One of the things is, is you want to write these down. I say top three because three is easy to do. You do your top three goals from your divorce. You can do 10 if you want. But I like top three because it really forces you to select your priorities.
 
 So here's what happens after you have those three goals. So you're going to have two sets of goals, one set of life goals and one set of divorce goals. What you should be thinking about during the divorce process is, how do I make decisions today that get me closer to those goals? Now, everyone that you work with as part of the divorce process should have a good sense of your goals, because if your attorney knows what your life goals are and what your divorce goals are, he or she can structure a divorce settlement that helps you get closer to those goals. If you tell me your goals, and you don't have to tell me, most of the time I'll ask you, particularly if we're working on a more in-depth case or situation. Sometimes people call with a very specific question and we go through the specific question. But if we work on a longer term basis, I'll ask, "What do you really want? And how do we get you closer to those things? And how do we come up with a strategy and daily steps to move you closer to those goals?”
 
So one of the things that you need to be doing is sharing those goals with everyone that you're working with. And another thing that's important about your life goals and your divorce goals, particularly the divorce goals when it comes to sharing them, is, sometimes we'll say, "That's not realistic." Either realistic or not realistic, or a bad idea. So sometimes someone will come and they'll say, "I want every asset. I don't want my spouse to have anything after the divorce." I'll say, "You know, I understand that's a goal of yours, but that's not realistic, because if your spouse has a semi-competent attorney or if you go in front of a judge, no one's going to let that happen except in the most extreme of scenarios. So you need to adjust your goals.”
 
Conversely, sometimes someone will say, "You know what, just give my spouse everything, I'm just going to start fresh, and I just want this over next month and we're going to move on." I'll say, "Hey, you could do that if you want, but that's not a good idea, and here's why." Ultimately the goals are up to you, and you might want to adjust your goals a little bit. So the point is, is one of the reasons you write these down, you share these goals, is so that everyone's on the same page working for you.
 
Now you have your two sets of goals, and you start figuring out what you really want. What happens is, if people know what you want, people like me or like your attorney, or just you yourself having clarity as to what you want out of the divorce process, you can start taking actions and creating step by step actions to achieve those wishes, those wants, those goals, that direction that you want. So whenever an issue comes up, particularly as part of the divorce process, you're going to faced with some major issues about assets, about kids, about life, and these are substantial questions. Well, when you have your goals, when you know what you want, you will have a north star to help guide you. Basically, when you're facing a particular issue as part of the divorce process, you can say, "Well, does this fit into my life goals? Does this fit into my divorce goals?" If it doesn't, then you need to make ad adjustment or take a different action. Or if it does fit in the goal, you can say, "Yeah, you know what, this is what I was aiming for.”
 
But if you don't have your goals and you don't keep those high level things in mind, you could end up running down a path that you never intended to take. Or, as I started with the Yogi Berra quote, "You've got to be very careful if you don't know where you are going, because you might not get there.”
 
The other thing I want to leave you with as you think about setting goals and deciding what you really want out of both life and out of the divorce process, you need to have some flexibility. So one of the most important things and one of the most fun parts of my job, and yes, I do have a lot of fun, I get to help people with very hard questions, I know that you're in a difficult situation, but everyone I work with is a good person who finds himself in a tough spot, so one of the questions or one of the things you have to keep in mind is, there isn't a fixed path to your goals and sometimes you need to have, or all the time you might need to have some flexibility regarding them.
 
So I'll give you a very concrete example. I'm going to keep it generic but concrete. Let's just say you want to have enough support, enough spouse's support to live comfortably for the next 12 months while you get yourself on your feet and find a job. Just using that as an example. Well, you might be thinking in your head, "Well, I need $3000 a month in support to achieve that goal." Well, that may be true, that might be one way to achieve your goal. But what if there is another way? What if that other way was, you got a lump sum payment for $34000, which is a little bit less than the monthly amount, but you have it all upfront, and you have the money to live on and you've achieved the same goal of that financial security for a year, but it came in a different form?
 
Or what if you ended up with a house that's fully paid for or close to it and therefore your living expenses are lower than you anticipated because you don't have to go find a new place, and instead of $3000 a month you only need $1500 a month? It's about flexibility. In all three examples you've gotten to your goal of being able to live comfortably for the next year, but there were different paths to get there.
 
So when you think about your goals, and as I said, that's a very micro example, but for any goal, whatever it may be, you have to realize that there are different ways to achieve what you were looking to achieve. So having flexibility is very important when you think about your goals, because they don't always happen the way that you originally had in mind. But just because they didn't happen exactly the way that you thought they were going to happen, doesn't mean they're not going to happen. It just means that you need to be open to alternative solutions and alternative ways to getting what you want to get to and have out of life and out of your divorce.
 
So as you think about the divorce process, really sit and start by asking yourself, wherever you are, what do you want? Are the decisions you're making right now setting you up to get to that point that you want later down the line? If you keep that question in mind, and I actually, believe it or not, I have a daily email that comes to me every morning, it comes at like 3:00 AM, so by the time I get to my desk, whatever time I get to my desk, I usually get up pretty early, but I have a daily email that says, "Here are my goals." And I get to look at those every morning and then I look at my schedule and what I plan on doing today, and I say, "Hey, does this take me one step closer to my goals?" If it does, then great. If it doesn't, then I'm working on the wrong thing. So I keep those in mind for myself.
 
It is something that you should be doing as well, to make sure you stay on the right path and make sure that you are getting what you want out of this process.
 
 
Mar 27, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
In the previous episode, we were setting a stage for understanding your fixed monthly expenses. If you didn't hear the previous episode, go back and listen to that one first before you continue on with this one. What we were discussing is you need to know your fixed monthly expenses as accurately as you can in order to really plan for not only to negotiate a settlement that's truly workable for you, but also so that you understand what your post-divorce life will look like from a financial perspective. Because, you're going to have to know what that is, and you don't want to be surprised by the results.
 
Really. One of the things you should be thinking about is if the result that you see today, given your current life style, doesn't look like it's going to be feasible going forward. You can start planning those things, and the changes you're going to need to be making now, and start thinking about what kind of changes you need to make today so that when your divorce is over, you can live on what's a realistic and feasible budget going forward.
 
Now, one of the things to think about is some of these things do require planning. If you're thinking about selling the house, that could take you six or eight months, or longer, depending upon where you are from the time you decide you want to sell it to it actually being closed upon, and you having funds from the house, and if that's going to help you reduce your monthly expenses, and that's something that's feasible given your situation. You need to start thinking about those today rather than waiting until six or eight months from now and try and rush and scramble.
 
 What I wanted to do in this episode, though, was really discuss an example of how your, a few examples of how understanding your monthly expenses can be useful to you.
 
Let's say you do a calculation. I'm going to try and use simple math, because I know it's really hard when you're on the treadmill, driving in the car, or doing walking around, which is where I listen to podcasts all the time, or cooking, or doing any number of things at the moment to keep up with math, in particular. But, it's very important to illustrate some points, and for better or for worse, if you are getting divorced, then maybe you haven't been involved in the finances. You're going to have to know these numbers going forward, because you can't, like the old ostrich, you can't just stick your head in the sand and pretend like the lions are going to go away.
 
These numbers, although they're not lions, they are expenses, they're here, and you need to know what they are, and you just need to be prepared for them.
 
Here is what's important. Let's just say, for instance, that you have $10,000 a month in expenses, which is $120,000 a year. Easy numbers to work with, $10,000 a month times 12 months is $100,000. Let's say you're going to be the person receiving spousal support.
 
I'm going to say, in this case, you were a stay at home parent, and the laws in your state, and what you're negotiating, or whatever else, you can expect $6,000 a month in support, or $72,000 a year.
 
Remember, you have $10,000 a month in expenses, and you're going to receive $6,000 a month in support. What does that mean? It means that you have to make up $4,000 in income to keep the bills from racking up, and racking up debt.
 
What does that mean? It means that you need a job that pays you at least $4,000 a month in this scenario. Or, to put it a different way, is at least $48,000 a year in income from your job in order to stay current, in order to cover your monthly [inaudible 00:04:40], your monthly expenses. You're getting $6,000 in support, you have $10,000 of expenses, you need $4,000 a month in a job.
 
Of course, I'm oversimplifying things like taxes, and variable expenses, but that's the point, is, you're going to need to know that you're going to have to either go back to school, or hopefully you maybe already have a skill, or whatever else, but in order for you to keep from living off of your savings, or to keep from racking up debt, you need to know today that in this example, you're going to have to make $48,000 a year in your own income after this divorce process is over, so you need to get to it.
 
Now, let's play with this simple calculation again when it comes to expenses. Now, let's say you know that right now you have $10,000 of expenses, $10,000 a month in fixed expenses. What if you look down and you went through the worksheets, and you made a list of all your expenses, and gathered up your numbers and you know that it's $10,000 in expenses now, but you look at some of the things, you look at a few of the items, and you say "I think I can cut some of these expenses. Some of the small ones I can cut out, some of the bigger ones I can cut out."
 
Maybe, because this is the most common, what I'm going to use as an example, but you're thinking to yourself "You know what? I think we can cut this house expense, we don't need this big house anymore, because it's just going to be me, or me and one of the kids, or the kids have grown." Whatever else, it doesn't matter.
 
You know, you're thinking that "I don't need this big house anymore, and I can downside, and move to a smaller place, and save some money." After you look at your budget, and you look at your expenses, instead of $10,000 a month, you're now at $7,000 a month, or at least you think you can go to $7,000 a month in expenses.
 
Now, $7,000 a month, remember the first exam- ... we're starting at $10,000, but you say "You know, I can make some life style changes, leave those broad, and then get down to $7,000 a month." $7,000 a month is $84,000 per year in fixed expenses.
 
Now, $84,000 a year in fixed expenses, all right, still heavy, but a lot better than $120,000 a year in the previous example. You have $7,000 a month in expenses, instead of $10,000 a month. We said, in the previous example, you were getting $6,000 a month in support.
 
Guess what? Since you've reduced your expenses, all you need to make now is an extra $1,000 a month in income to cover your expenses. Instead of needing a job that pays $48,000 a year, which is probably a full-time job. You only need to make $12,000 a year in order to keep from living off of your savings, or rack up any debt.
 
$12,000 a year is not a very high burden for most people. You can probably find a job, part-time, or even some of the stay-at-home jobs that will easily pay you that extra $1,000 a month. You could even drive for Uber these days and make $1,000 a month extra.
 
The point is this, is simply by reducing those monthly expenses, those fixed monthly expenses, you went from needing to make $48,000 a year, to $12,000 a year just on that $3,000 a month difference. That's a huge thing to think about.
 
Now, your numbers are going to vary, this was an oversimplified example. But, the point is the same, is that if you can cut your monthly expenses, particularly after divorce, whatever your situation is, you can put yourself financially in a much better place, and have a lot more breathing room than you would have otherwise.
 
 If you ever wanted the complaints, I get complaints about attorneys sometimes, because they don't always have the best bedside manner. But, sometimes, attorneys will say to you, as the client, they'll say "Yeah, yeah, you just got to sell your house, and move on." They might say it like that, but they're really just doing the same calculation we just did.
 
They could've said it better to you, because you have so many things going on, but really, they're saying "Look, if you can cut your expenses down quite a bit, I know the support laws in the state" or "I know what your income is, and what you're likely going to have after this divorce process is over, if you cut and sell the house, you might be able to make some substantial life style, I wouldn't say life style improvements, but you will not be in a position where you're always trying to catch up each month, and just treading water for the future."
 
Now, the other thing I wanted to mention related to this is, when you think about your monthly expenses, I know we talked about big monthly expenses, but we can also consider some smaller monthly expenses.
 
One thing that people think about, and often forget, is that there is no monthly expense that's too small to reduce. What do I mean by that? I mean, you need to think about, of course, the big expenses, but also, even the tiny ones. Let's just say, because I may have been watching Netflix earlier, let's just say you have a $10-a-month Netflix subscription.
 
Most people don't really notice the $10 a month, it's such a small amount for most people, and just occurs once a month, and you kind of say "Hey, I don't really need that," I mean, you don't really ever cancel Netflix, not a lot of people cancel, because it's such a small amount in a given month.
 
But, something to think about that most people, and this is how I think about monthly expenses, $10 a month, times 12 months, is $120 a year. $120 a year times five years is $600 over five years. The question you have to ask yourself is is Netflix worth $600 to you? Or would you rather use that $600 for other things? That's just from a $10 a month subscription.
 
What if it's something bigger than that? The point is that monthly expenses, no matter how small, they really add up, because they occur every month until they disappear.
 
A simple one, also applies for my life today, is I am, if you were to see me in person, I like to go to the gym, and I eat a lot of food. I also live about 40 feet from am Original House of Pancakes. One of my favorite meals is four eggs, six pieces of bacon, some toast, some jam, some butter, some coffee, and I eat that meal multiple times a week.
 
But, I made a change in my life, because I was like "Look, I got adjust my monthly expenses." I'm always trying to think about ways to make my life more efficient as well. I said "You know what, instead of going over to The Original House of Pancakes, sitting down, spending $12 on my favorite meal, what if I spent 10 minutes, and it literally only takes 10 minutes, to make that same meal myself?" I get eggs, and scramble them, and put toast in the oven, and everything else. Then, in 10 minutes times several times a week, I spend $4 on ingredients, $4, instead of the $12+ I was paying several times a week at The Original Pancake House, and I like my cooking even better than theirs.
 
Just that little change, saving $8 three times a week, we're going to call that $24, that adds up to quite a bit. All for less than 10 minutes of my time to put together, times years, that's a lot of money.
 
Another example of cooking at home, just in terms of expenses and things to think about is salads. I like to eat lots of salads. I was paying $11 at the salad place near me, I went to the grocery store, I bought a big container of salad greens, and some fruit, and some olive oil, and vinegar, and a couple other toppings. Now, in the span of about 70 seconds, and instead of $11, for $2 of ingredients I can create a healthy fresh salad that was just as good as the $11 I was paying before.
 
You multiply that, let's just say I save $5 a day on average on food, that's $35 a week, that's $140 a month, which is $1600 a year just on a $5 a day food change that I made in my life, which is also helping me be healthier, and other things.
 
But, I, like you, want you to be very cognizant of all of your monthly expenses, big and small. Because, when you're in divorce situation, you're really going to need to understand your finances, and understand where the money goes. Are you spending efficiently? You're going to probably have to make some adjustments, and now is a good time to really dig down, and see what's essential to your life, and what you don't need anymore.
 
I know people who've gotten rid of babysitters, or things like that, that weren't huge burdens, but they ended up just being happier doing things themselves, or not having someone in their life. All of this, this time of your life is an opportunity to not only understand your finances a lot better than before, but there's no better excuse than "I'm getting divorce" to make a change in your life.
 
You don't have to make every change at once, but you should be thinking about ideas, and what the major changes are in your expenses that you can make today, because it'll make your future life much easier, much less of a burden when you're worrying about keeping up with next month's bills, or your bank account is low on money, or you're just withdrawing from your savings, and it's like you're continually losing money each month.
 
If you can cut those expenses down, that'll put you in a much, much better place than you would've been before. You will be on a much more solid financial footing for the future.
Mar 20, 2018
Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.
 
Thank you for listening! Find a transcript of this episode below.
 
I was meeting with a client in person recently and we had a long discussion about whether or not they should keep the house or sell it as part of the divorce process. One of the things that, although in theory they could afford the house and keep it for a few years as the kids grow up and they want to keep some kind of consistency, that might not have been the right line of thinking for this person and ultimately the more we talked about it, the more we discussed how the house could become a burden. It's something that could actually cause, keeping the house, could cause more harm than good. But we're not going to talk about the house specifically today, that'll come up a lot in this episode. I want to speak more broadly about how you should you think about your expenses, and your post-divorce expenses, and understanding your post-divorce picture, even before you start the divorce process or if you're in the middle and going through it.
 
One of the things to keep in mind is that once you get divorced, actually, almost all financial advice, you can read every book in your local library, every book on Amazon, every book in Barnes & Noble, which is one of the few book stores that still has physical shops, and if you read every personal finance book all the advice boils down to this: make more money than you spend. Very simply, your income needs to be higher than your expenses. If your expenses are higher than your income, that's bad, but if you are saving money every day, week, month, year, in the long run you'll never run out of money. If you are net spending money, you will increase in debt. It doesn't really matter what your total income is. If you make $50,000 a year, so long as you're only spending $49,000 a year or less, you'll be in pretty good shape for the rest of your life, I mean, your whole life, so long as that's your picture. If you make 50 million a year, yeah, 50 million dollars, if you spend 49 million dollars a year, you're good.
 
But guess what? I know people who, not a ton of people like this, but I do know people who make 50 million dollars a year, and they spend 55 million dollars a year. Guess what? They have tons of debt, and they can end up going bankrupt. I've seen it before. Conversely, if you make $75,000 a year, but you're spending $82,000 a year, that is not a good situation to be in. It doesn't really matter what those final dollar numbers and dollar amounts are, you have to be savvy and you need to spend less than you earn. That's the context for this.
 
 Why do I bring this up? Well, one of the most important things you need to understand when it comes to your post-divorce life ... Look, everyone listening to this podcast will no longer have to listen to me at some point, which is a great thing to think about. I'm always happy when I lose a listener, funnily enough, because your case is over, and you get to move on with the rest of your life. But as you're thinking about your settlement, or the divorce process, one of the things you need to do, and manage most efficiently, is cutting out and thinking about and understanding the fixed expenses. Wherever you can reduce them, you should reduce those fixed expenses.
 
One of the things that, or the way that people describe fixed expenses is oftentimes called your monthly nut. I don't know why it's called that, but that's what people call it. Basically, I won't say people call it, but I know a lot of people who call it your monthly nut. I think it's kind of a crude term, but basically just your fixed expenses, and what you need to make every month so that you're not losing money, or not spending from savings, or not racking up debt in one form or another. This is the amount of money you need to make to keep constant, to break even in a given month, where your income and your expenses are at least even.
 
When we talk about monthly nut, we're basically just talking about the expense side of the equation, because that's the important thing. The lower your monthly nut, the lower your monthly expenses, the more wiggle room you will have after divorce. More importantly, what that means is that it'll be easier to rebuild yourself financially after the divorce process is over. Almost no one ends up in a better financial position after divorce than they did before divorce. One of the ways to mitigate the impact of divorce, or to rebuild your life more quickly, is to have a low fixed monthly expense base.
 
The main question, of course, is what is a part of your fixed monthly expenses? Let's dig into a few items that we're talking about. If you haven't gotten it already, get my courses, go to store.divorceandyourmoney.com, or you just go to divorceandyourmoney.com/store, and I have some great courses in there. In the courses, there are some awesome checklists to help you stay organized. If you buy the courses too, I have some Excel templates I'd be happy to share with you as well, or some worksheets that I'd also be happy to share, that provide some of this information. If you go through the courses, you can follow along in depth, so you can work through your situation specifically.
 
Let's just take an example of your monthly nut. We started by discussing the house. Now, the house is going to come back in this part of the discussion, because it's one of the biggest variables in your monthly expenses. If you can reduce your monthly expenses in any capacity, then that's great. Specifically, when it comes to the house, the house is one of those expenses that, depending upon where you live, and of course that's a big variation depending upon what part of the country you live in, and actually even what neighborhoods matter in your city that you want to or need to be in, but some people I know can reduce their monthly housing expenses for 20 or 30 or 40 or even 50% a month in terms of what they're paying for the house. When you're dealing with a divorce situation, where you're going to be on your own and single finances in a bit, that's something that you can think about.
 
The reason that house expenses can add up is you have not only just the house itself, but you have things like a mortgage amount, electricity, property taxes, utilities, lawn care, and everything else that goes into maintaining a house. What you need to do is sit and write down all of those costs that you pay every month, every year, and even some of the ones that occur every several years, like a new boiler, repainting the house, and really figure out what are those on a monthly and an annual basis, because they add up. The real question you're going to need to be asking yourself is, will I be able to afford this when the divorce process is over?
 
Now, the house is just one of many monthly expenses. For all of you listening who are going to be paying spousal or child support, support payments are a fixed monthly expense. Now, you need to know what range of a fixed monthly expense can work in your situation. There's other fixed expenses, from what kind of car you drive, to what types of insurance you have and how big the coverage limits are, to utilities, to internet access, to things like that. These are all fixed expenses, to some sort of basic level of food that you need each month.
 
Now, there's also an opposite, which is called the variable expenses. These are the expenses that are ... They use a term discretionary, is one way that they describe it, but basically these are the expenses that you like, but you can live without. What goes into a variable expense? Well, something like entertainment, and eating out. I know some people who spend, particularly some of my New York friends, who spend many thousands a month on eating out. Now, it's part of being in New York City that people can spend thousands of dollars a month on eating out and that not being a weird thing, but it's something to think about, because when you don't really have a kitchen. But if you live in the middle of the country, or in a suburb, maybe you just go out once a week, but if you're going out four times a week for dinner, you might need to think about how you can cut that back a little bit.
 
The point is, though, is you need to, if you're listening to this, you need to really understand, just conceptually, what are your monthly expenses? Are your monthly expenses, are they ... You should figure out as accurately as you can. For some of you, your monthly expenses might come out to $3,250 per month. Actually, I know what my monthly expenses are, at least on a personal level, and also for the business I have to know exactly what those monthly expenses are, especially when you have payroll and office rent and everything else. So, I have a very clear understanding of my monthly both personal and monthly business expenses, and I look every month, because it gets deducted straight from my back account, I look, and say, "Hey, do I need to keep that expense?"
 
Now, if your number is $3,250 a month, you need to write down $3,250 a month. If your number is $17,800, then you need to write $17,800 a month as your monthly expenses. I know plenty of you listening who are in both ranges, everywhere in between. I know some people I work with who are lower than that, and some people I work with who are much higher than $17,000 a month in monthly expenses. But it doesn't really matter exactly what that number is, because everyone's life is different. You have different lifestyles and lives. What the important part is, is regardless of who you are, how much money you have or don't think you have, it's you need to know what that monthly expense number is. Here's why it's important, is if you know what your monthly expenses are, you will have a very clear sense of exactly what you need in order to make it through the divorce process, and how to negotiate a settlement that is workable for you.
 
Now, the next thing I want to discuss, and I'm going to discuss this in the next episode, but I really want to dig into, dig deeply into understanding the examples of how your fixed expenses can have a big impact on your settlement, and what that means in terms of what your job looks like going forward, if you need to get a job, or if you're paying support, how that looks for you, and I want to go through some examples in the next episode of ways that you can start reducing your monthly expenses.
Feb 20, 2018
This episode contains some lessons that many people learn as they go through a divorce. Here are four things to avoid as you go through the divorce process:
 
  1. Don’t do anything shady.
  2. Don’t believe your ex-spouse about what is going on in your divorce.
  3. Don’t be oblivious about what is going on in your marriage and family.
  4. Consult an attorney for either your whole case or on a limited basis.
 
Some people try to get away with suspicious activity when going through a divorce. One of the most common examples is moving sums of money around or trying to hide assets. They may try to adjust their income in an effort to pay less support later. Avoid doing these things. It will probably come back to haunt you.
 
If you have not been in the loop with regards to the marital finances, you may still have a sense that there is something odd going on with your spouse. If you were the primary earner in the marriage, you may think you are being clever by hiding money, but your spouse is probably not oblivious to what you are doing. When you have been married to someone for a long time, they will probably know if something is out of the ordinary. Suspicious actions can come back to hurt you later. Don’t do anything out of the ordinary, because it can hurt you later.
 
Some people are coming from a relationship where there was an imbalance of power. Maybe your spouse was in charge of more things in the household and was more dominant in the relationship. They may be making threats about custody or keeping assets from you. Any time you hear threats from your soon-to-be-ex-spouse, you should ignore them, aside from communicating them to your attorney. Spouses can say a lot of things to try to scare you. Just understand that there are laws to ensure a decent outcome for both parties. Your spouse’s threats are likely to be empty.
 
 As soon as you know that divorce may be in the near future, you need to take control of your life. Get your credit report. Make sure you know about all of your credit cards, retirement accounts, and any other debts or assets. Gather up important documents like your estate plan and your will. Be aware of your expenses and what it costs to maintain your lifestyle. You need to take control of every area of your life. Your attorney will not figure everything out for you. You cannot ignore this and hope it will go away.
 
Some people try to pursue a divorce themselves, without an attorney. This usually happens when the divorce is mostly amicable and they can reach an agreement on most of the issues in the divorce. However, it is important to ensure that whatever settlement you reach will make sense for the both of you. If you end up doing something that’s far outside the bounds of the law for your state, you may not be making the best deal. You also could be missing a large element of your divorce. There are regulations for some aspects of divorce, like custody agreements, that you need to be familiar with. It’s a good idea to consult an attorney to make sure your settlement is within bounds. Even if you are an attorney in another area of the law, you are probably not equipped to handle family law.
 
Before you go, visit divorceandyourmoney.com:
1) Sign up for the email list to get exclusive tips you won’t find anywhere else.
2) To get access to the best divorce resources in the United States, check out the store here.
3) Get personalized help. Learn about coaching services here.
 
Thank you for listening!
Feb 15, 2018
Today we bring back guest Matt Sweetwood, to announce the release of his new book:
 
Leader of the Pack: How a single dad of five led his kids, his business and himself from disaster to success.
 
"I was unprepared, overwhelmed, broke, and often depressed and I was sure I would not live through the experience. 
 
With five kids under eight years old to care for, a large business to run, a court system bent on bankrupting me, all I saw was a 20-year jail term ahead of me, ending with me old, broke, and broken…Finally, though, one day, it was over…
 
Get it on Amazon now!
 
Available for Download: Feb 15, 2018
Soft Cover Available: Mar 8, 2018
 
Before you go, visit divorceandyourmoney.com:
1) Sign up for the email list to get exclusive tips you won’t find anywhere else.
2) To get access to the best divorce resources in the United States, check out the store here.
3) Get personalized help. Learn about coaching services here.
 
Thank you for listening!
Feb 6, 2018
What happens if you are going through a divorce and have digital assets? Digital assets can come in many forms. Bitcoin and cryptocurrencies are popular topics in the news lately, but there are other forms of digital assets like your music library, ebooks, rewards points, or even a website you own. When it comes to digital assets, state laws have not yet caught up. Many of these assets are relatively new, and the laws cannot always address all the complexities of splitting them. In addition, there are often unique elements about digital assets that make it difficult to know their value and how to split them.
 
This episode will give you some steps to take if you have any kind of digital assets.
  1. Figure out if you have any digital assets.
  2. Determine what is marital versus separate property.
  3. Figure out what you can realistically do with those digital assets.
 
Digital assets can be hard to find. In some cases, it may even be hard to realize that you have them. Some of you may have an online business, like this podcast. 
 
You may have a blog, an ebook, or Bitcoin. Digital assets are just data. Since they are intangible, it can be challenging to identify them. Think about what assets you may have. Most of you probably have some kind of rewards points, such as a hotel brand or airline rewards. These can often be translated to a dollar value.
 
Most of you have been married for a length of time, from several years to decades. In that case, the digital assets you have are likely marital property, especially if the assets are so new that your marriage predates them.
 
The nature of the digital asset and its value will be relevant. For example, you can determine a dollar value for your airline miles. The other spouse may end up getting a credit for those miles in the divorce negotiations. You may also opt to transfer the miles.
 
Some digital assets can be split relatively easily, such as Bitcoin, but you and your spouse could decide that one of you will keep the asset while the other receives the cash value of their portion.
 
Digital assets can be easy to hide, because they are intangible and there is often an element of anonymity. It is important to be aware of what digital assets you and your spouse have and address them in your divorce negotiations.
 
Before you go, visit divorceandyourmoney.com:
1) Sign up for the email list to get exclusive tips you won’t find anywhere else.
2) To get access to the best divorce resources in the United States, check out the store here.
3) Get personalized help. Learn about coaching services here.
 
Thank you for listening!
Jan 17, 2018

This episode will explain why most of you will want to finalize your divorce in 2018, if possible. After 2018, divorce will be even more complicated than it already is. You probably already want an efficient divorce process, but the recent changes to tax law will provide some additional incentive to move things along.

The change in tax law primarily concerns spousal support. Taxes are not a fun topic, but they are critically important to understand so you can make the best decisions for your situation. How you structure your divorce settlement can ultimately get you 20% to 50% more money and assets. For more about taxes and divorce, visit our archive.

To understand what is changing this year, we first need to understand how spousal support has worked for the past 75 years. Currently, if you receive alimony, you claim it as income and pay taxes on it. The person who pays alimony receives a tax deduction for the amount of the alimony.

For divorces that are finalized after December 31, 2018, the person who receives alimony will not count it as income. The person who pays the alimony will not receive a tax deduction. Why is this such a big deal? If you are the person paying spousal support, you get no tax benefit for paying the support, so you have an incentive to pay less. People who will receive support will probably be getting less.

These changes came from the tax bill that was passed at the end of 2017. If you can wrap up your divorce in 2018, you will not have to worry about it. However, if your divorce is not finalized until 2019, you will be affected by this change. If you are paying support, finalizing in 2018 will give you tax benefits. If you are receiving spousal support, you are highly likely to get more support if you finalize this year.

Who receives spousal support today? In a recent census, it was found that about 97% of people receiving spousal support are women. Most of them were stay-at-home parents during the marriage, or they worked fewer hours than their husbands. Although there are many female breadwinners, women are going to be affected greatly by this law.

What are your options if you find yourself in this situation? You can often come up with clever, creative solutions that will work for everyone. Here is a simple example. If you know that you will probably receive less spousal support for the foreseeable future, you can structure your settlement so that you get more money up front as a lump sum. This can help make up for the tax benefits that you will not be receiving. Look for ways to structure your settlement that will benefit you in the long term.

Many people wonder why this law is changing. There is a good reason for it. In 2017, about 350,000 people claimed they were paying spousal support, and received a tax break. However, only about 180,000 people said they were receiving spousal support (and paid taxes on that spousal support). This means there are 170,000 people who received spousal support who did not report it to the IRS. That adds up to billions of dollars of lost tax revenue.

In future episodes, we will discuss more details about taxes and how to structure your settlement. There is no need to panic, but it’s important to understand how this change will affect you in the broader context of your divorce negotiations. If you understand that you will be losing money because of the change in tax law, you can look for ways to make up for it.

Before you go, visit divorceandyourmoney.com:
1) Sign up for the email list to get exclusive tips you won’t find anywhere else.
2) To get access to the best divorce resources in the United States, check out the store here.
3) Get personalized help. Learn about coaching services here.
 
Thank you for listening!
Jan 3, 2018
With the start of 2018, there is a lot you should be doing to prepare for divorce. This is a great introductory episode for you to listen to! 
 
Learn more about all of the great Divorce and Your Money resources at divorceandyourmoney.com.
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