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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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Now displaying: March, 2018
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.
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