28 Mar Your Housing Options after Divorce Just improved

Major banks in Canada recently announced a reduction to their fixed rate mortgages. It seems bank executives are more confident about the housing market and the likelihood of a major correction in housing prices.

This should provide good news for people who are separating and making decisions of how they split their assets, in particular, the matrimonial home. For many, keeping the house is important for couples with children and keeping a stable environment for them. For older couples, whether they choose to buy a partner out and remain in the matrimonial home or sell and each purchase a new home, lower interest rates allow for more flexibility when it comes to possible settlement options.

Managing two households costs more than maintaining one household. With late in life divorce, retirement plans are greatly affected by housing costs.

Many people finance equalization payments owing to spouses through refinancing existing mortgages, so lower mortgage rates in those situation helps.

If selling the matrimonial home is part of a settlement plan, lower mortgage rates make home buying more attractive. If keeping the matrimonial home is an option, managing cash flow is easier with lower monthly mortgage payments.

The home you want to keep or the home you want to buy after divorce may
now be a real possibility.

14 Sep Joys of Home Ownership… Or not

 

Elise (not her real name) was happy when she ended up as the sole owner of the family home as a result of her divorce property settlement. But getting the family home in a settlement isn’t always the best thing.

Located in a nice neighborhood, the home was valued at more than half a million dollars. The property had increased 4 fold since she and her ex-husband purchased it some 18 years ago.

Elise needed a mortgage to secure the home, but the monthly payment was well within her budget (or so she thought). She wanted to keep the house to minimize the impact of the divorce on her two kids, avoiding changing schools and uprooting friendships. “There’s no way I’d ever be able to find another home as nice as this one,” she told me.

Less than one year after the divorce, things started falling apart. First, the furnace needed to be replaced — a $900 expense, which she charged to her VISA card. Then, a leaky roof  needed to be replaced — $1,600,  which also went on her credit card. That spring, the fence along one side of her property fell down after a big storm and upon examination, it was discovered that the main posts were rotting so guess what, a unplanned new fence went up  while she was on vacation with the kids. (the fence and the vacation went on her  line of credit ). She wondered what might come next.

Then, toward the end of summer, her washer failed. Because the warranty had expired a year earlier, it made  more sense to buy a new, more energy efficient washer for $1200 than paying the $500 repair bill.

Her debt was piling up. Before she knew it, her credit card and line of credit debt had grown from zero to more than $21,000, all since the divorce.  Small repairs and routine maintenance  expenses never seem to stop  (like hiring someone to do lawn  and snow removal that her husband had done before)

I routinely call Elise to see how she’s doing and she voiced her concerns about the house which was approaching a point where more costly repairs might also become necessary.  I told her she had to consider the possibility she might be best off  selling this house and move to a newer home requiring less maintenance. I recommended she get a home inspection by a licensed home inspector while she considered her options. She knew she couldn’t sell it and get what she wanted for it without first doing some of repairs.  I called two realtors to get independent market appraisals. I requested assessments both with and without the repairs. Both agents agreed the repairs were necessary and would generate a higher selling price that would more than cover her costs. Elise concentrated on the things that most potential buyers focus on (the roof, new paint job and new tiles in the bathroom). The realtor also took her around and showed here what newer homes were available in the neighbourhood. With information provided by the realtor re selling and buying options, I was able to provide Elise with a budget of future housing costs. I showed her how she could pay off all her debt, putting herself in a far more comfortable financial position going forward.

The repairs were completed quickly. The house sold a few weeks after listing it. She and her kids moved to a lovely new home in the same neighbourhood. Elise later told me that moving to a new home was actually a great relief as it represented the fresh start she needed to move beyond the divorce. Having the right numbers and information paid off for her.  A Divorce Financial Professional can help you get the right numbers and information before you sign your settlement agreement which may lead to an even greater pay off for you.

 

Image courtesy of FreeDigitalPhotos.net

12 Sep Do I have to keep saying no to my kids?

 

One of my clients described how her son was afraid to tell her that he’d outgrown his running shoes. Another said her daughter declined invitations to go to the movies with her friends because she didn’t want to have to ask for movie money. Kids understand the financial changes that occur after divorce.

How can you make ends meet and maintain your family’s lifestyle if your income after divorce is insufficient?

Child support payments are not intended to cover all costs associated with raising a child, and often fall far short. They take into account the cost of food, housing, and clothing. But they do not cover a range of other expenses from after school activities like music lessons or sport lessons to vacations, or cell phones to school supplies. These expenses rise significantly as children get older. Does everyone under the age of 18 really have an I-Phone?

The first thing to do, whether you’re contemplating divorce or are in the process of divorcing, is quantify how much your lifestyle truly costs. As a divorce financial professional, I help clients put together projected budgets. It’s important to account for as many details as possible:  the cost of summer camp, rep hockey, tutoring, a computer the child will need for school in later years.

Then we weigh these financial needs against a couple’s ability to pay. Does the family income cover this budget plus a reasonable amount for the non-custodial parent?  If not, can a division of marital assets help supplement the difference? Can we scale back to a bare-bones budget? Can we distinguish between wants and needs?

In divorce, financial support comes from 4 sources: Employment Income, Child support, Division of marital assets, spousal support. Each of these sources has different tax and financial consequences.  Yet because household spending on adults and children is intertwined, all three can contribute to a child’s financial welfare.

I work with clients to look at the financial and tax implications of proposed child support and spousal support payments along with the proposed division of marital assets.  I use software to project the short and long-term impact of a proposed divorce settlement. These projections can be really powerful.

 

What if you’re already divorced and find that you can’t make ends meet,  a financial planner specializing in divorce can work with you to put together a saving and spending plan and help give you a holistic picture of your finances.

Wouldn’t it be nice to say “yes” to your kids once again?

 

Image courtesy of FreeDigitalPhotos.net

29 Jun Start thinking of “smart spending” when divorcing

If you are divorcing or newly divorced, and trying to figure out how you’ll manage financially, it’s hard to think about your spending along with all the other issues in divorce. However, while you’re working through your settlement, you can start to think about how to save in many ways without feeling like you are “penny pinching”.  Each savings will add up more than you could believe possible.

Did you know that every minute water flows down the drain wastes up to 2.5 gallons? So turn off the water while brushing your teeth or shaving. Only run the dishwasher and washing machine when you have full loads, water plants in the morning when the water is less likely to evaporate.

Drive the speed limit, go easy on the brakes, and carpool when you can. The more moderate your speed, and the less you rev the engine, the less gas you are going to use. This could save you $4 to $40 a month depending on how much you drive.

Almost a third of gift cards go unused. And more get used too late. If you read the fine print on the back of the card, you may be shocked to see that some cards expire as quickly as six months after their purchase. Others charge $1 to $2.50 for dormancy, maintenance, or inactivity fees if they’re not used within 6 to 24 months. Solution: Shop and save the face value of your card!

The average household gets 15 bills a month. At 61 cents a stamp that’s over $100 a year. See if your bank offers free online bill payments.

It may not seem like a lot, but most out-of-network banks charge $1.50 to $3.00 for a bank withdrawal. Would you like to take out money and only get 97 percent of what you asked for? That’s what you get if you take out $100. Plan ahead and go to your bank’s ATM. You could save as much as $30 a year.

The point of insurance is to protect you when something really bad happens, not for small claims. Raise that deductible on your car or homeowner insurance and save $200 to $300 a year.

If you followed all of these tips, you could save hundred a year!

22 May Canada Pension Plan Benefits and Grey Divorce

If you are facing divorce in your 50’s, it’s imperative that you have an understanding what you may be entitled to in Canada Pension Plan benefits.  You should review your latest statements regarding your projected CPP payments. You can request a current statement of Contributions from Service Canada.   The expected amount may not change significantly depending on how long you continue working and making further contributions.

Depending on your separation agreement, you may need to consider applying for CPP benefits earlier than age 65. Recently, there have been significant changes to CPP pension amounts. Your monthly CPP retirement pension amount will decrease by a larger percentage if your take it before age 65. Before the changes, your CPP monthly pension was reduced by .5% for each monthly before age 65 that you began receiving it. From 2012 to 2016, the government will gradually change this early pension reduction from .5% to .6%.

What that means is if you start to take your CPP pension at age 60, your pension amount will be 36% less than it would have been if you had taken it at age 65.

In addition, the Canada Pension Plan credits which a couple built up during the time they lived together can be divided equally between them.

Knowing what your Canada Pension Plan income will be is key to understanding if you will be OK financially after a later life divorce.  Figuring it out is complex. You need the help of a financial divorce specialist to help you make sense of it all.

01 Mar Don’t divorce your kid’s expenses

Child support guidelines were created for the average of all families- not for any particular family.  Kids need food and heat and transportation.  They also need bikes and computers and birthday presents.  Someone has to pay for lessons and activities, sports equipment and school trips. Without a good road map the kids are likely to get caught in the middle.

Some parents need to get back to the drawing board to create a good operating plan to  ensure their kids get what they need in a financially responsible way.  The authors of
“Difficult Conversations” (Stone, Patton and Heen) suggest the following:

  • Don’t argue over facts, talk about what you perceive (“We might not be able to agree about why you bought the computer but I was left with the impression that you felt that you could make the decision to buy it without asking me first”.)

 

  •  Stay away from blame and focus on joint responsibility (“If we put some time towards making a budget for extra expenses for our kids, I think we could make better decisions as a family”.)

 

  • Don’t try to figure out what was intended, talk about the impact (“When you buy expensive items for the children it sets up expectations that I can’t meet.”)

Remember the goal is to distribute the responsibilities for what the kids really need between the households.  The object is to make sure the kids know what to expect and to have a sense of fair play about having their needs met.  And above all- the example set by both parents is a learning opportunity for kids to understand good money management and cooperation.

01 Feb Prepare an After Divorce Budget… NOW!!!

If you are facing divorce, you have  a myriad of documents and information to collect and sort. If you haven’t paid attention to the family finances, you may not be aware of what it takes to run the household now. For many, learning about what you spent when you were together is a challenging and difficult task. It’s eye opening for most. What you need to know is what your costs of living will be after the divorce. Some people’s incomes drop drastically after divorce. It’s best you be prepared by building a budget now instead of being hit over the head with bills you can’t pay.

You will have to estimate some expenses but it is important so that you can have some idea of what you will need to survive in your new life.  Where to start? A financial planner specializing in divorce can help you create your “after divorce” budget. They are trained and have the experience to anticipate situations and expenses you may not have considered or included. They can create projections to estimate such things as future mortgage payments, taxes owing on spousal support, future education costs, health benefit plans, etc. 

You need to know what you will need financially in order to evaluate your settlement options. It is also important to know your future needs because it will influence how you negotiate your settlement.

18 Jan Divorcing or Not – Establish Your Own Credit

If you don’t have any credit in your name alone you should establish some now. You can do this by obtaining a credit card but remember you want a card that is in your name only. Many women find that, after divorce they have a hard time purchasing a home or car because they have spent years sharing credit with their spouse. All that credit you’ve had over the years with your spouse is helpful to him but once you are a single woman, you will get very little ‘credit’ for keep those payments up.

Once you have a credit card in your name use is sparingly and make sure you are able to pay it off each month. The goal is to establish a good credit score not to run up a bunch of debt.

16 Dec Wellbeing of the Children

Say what you want about Charlie Sheen but he has at least one good thing going for him: a good parenting relationship with his ex-wife Denise Richards.  Despite what Denise calls “one of the worst divorces” it seems she and Sheen have put their difference aside for the sake of their two daughters Sam and Lola.  Richards has been there to support Sheen throughout this year’s many public falls, support she offers because “We’ll always have a bond with our daughters, and I wish nothing but the best for him.” Richards’s support of her daughters’ troubled father shows the importance of putting aside ones ego and focusing on what is important: the wellbeing of their children.

09 Nov Finding the Positives

A new study concludes that regular exercise not only keeps you fit, but it also promotes your desire to keep fit.  Other research has shown that the stimulus that provides energy to cells through aerobic exercise increases when you exercise.  This is like a continuing boost to the system.

Why is this important?  One reason is that when we look after ourselves, we feel better.  And when we are in crisis, and separation and divorce is one of life’s setbacks, we go through many emotions, from anger, to denial, to sadness and eventually to acceptance.  While we feel badly, we need help to feel better.

It is difficult to remember to take care of your health especially when feeling overwhelmed by the emotions of separation.  Making time for exercise, whether it is a long walk or a workout in the gym, is one proven way to promote recovery.

It is normal to feel that spending time with the kids is a higher priority when the family is going through a separation.  Try thinking about it in a different way.  “I want to spend more time doing the things that make me feel better and I want to spend more time with my kids.”  The importance of your own wellbeing is not an “either/or”.  It is an “and”.    Spending time working out a positive plan to make it happen is part of feeling better.