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.

17 Sep Divorce Costs

According to a recent AVVO divorce study, couples are most concerned about the costs of divorce.  People today have more choice in how they will proceed with their divorce..from  doing it themselves , mediation, collaborative practice,  lawyer negotiations to court.  The survey  indicated that a majority of people  (58%)  site the cost of divorce as a major factor/concern  in moving forward with the divorce.  When reviewing what approach may work best for  a family, making the right choice in terms of professional fit , control, timing are all  things that need to be considered. However, the reality of the total  expense for the family appears  to be a big  part of the decision.

It’s important to establish from the beginning some sort of “divorce budget”and understanding the value proposition of any process  you ultimately choose.  Being quoted the hourly rate or first retainer  is not enough information. Getting the answer .. “it depends” to the question “How much will this cost”  may not be good enough anymore.  Understanding that other professionals are part of a divorce team and learning  what they all do in the process, what they charge, what their involvement may be , and  what couples can do on their own, helps  in understanding what the  ultimate  costs may be .

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15 Oct Divorce Settlement Options

When it comes to the financial aspects of divorce, it not just lack of understanding of the family’s finances, it’s the lack of information about a family’s financial picture that tends to make good financial decisions challenging  for couples when they decide to divorce.

One spouse may  know more because they managed the family investments or were in charge of paying the bills.  After all, the couple may have thought it would be a waste of time for both to balance the check book twice every month so one takes the responsibility and tends to keep doing it throughout the marriage.

Important decisions to be made when negotiating your settlement need high quality information from which to judge the options. The spouse with less knowledge may spend more time collecting documents,  working on past and go forward budgets. This is the most important part of divorce financial planning.   Decisions regarding finances are based on choosing one option relative to another. If you are confronted with a decision you must make based on limited information you risk  reaching a poor conclusion that may  affect you for a long time.   That’s why divorce financial planning before, during and after is critical to  your future when dealing with separation and divorce.

 

Image courtesy of Keerati at FreeDigitalPhotos.net

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

13 Jul Summer Spending

With hot summer days, the malls are a cool place to beat the summer heat.

Summer time means summer sales are on in full swing.  With the economy as it is, the discounts stores offer are deep and tempting.  As much as you may try and stick to a budget, it’s hard to do when the 70% sales signs are calling. Say good bye to budgeting as we can always rationalize a “great bargain”.

Budgeting is never fun. Implementing an annual budget and breaking it down by month and even by week and then day by day is challenging and take lots of discipline. Temptation is great with the deals stores have going on. Stay strong.

Put away the credit cards when you head to the mall. Just say “no” to spending more. Treat yourself to a gelato or iced coffee to keep your financial cool.

 

* image from 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!

05 Jun Measuring Your Lifestyle

A business metric is any type of measurement used to gauge some quantifiable component of a company’s performance. Business metrics are part of the broad area of business intelligence, which comprises a wide variety of applications and technologies for gathering, storing, analyzing, and providing access to data to help enterprise users make better business decisions. Creating a “metrics” to measure family lifestyle can be a valuable tool when you are separating. It useful information to have and it is usually part of the financial disclosure information required.

A family’s “lifestyle metrics” includes

  • The day to day living expenses incurred during the marriage
  • Spending habits of the individual family members
  • Recurring  expenses by category of expense
  • Unusual , non recurring seasonal expenses

Benefits to you :

  • Information is accurate rather than “best guesses”
  • Provides a reality check for couples of where their money is really going
  • Uncovers any gaps /discrepancies between reported income and non reported income
  • Provides more accurate picture of what is required by each spouse post separation
  •  Starting point for  each spouse to develop their own individual future budgets

Speak to me about the possibility of creating a metrics of your family’s lifestyle.

 

01 Jun Financial Homework in Grey Divorce

When you’re considering divorce in your 50’s,    a big concern is the financial impact for you and your spouse at this stage of your lives.  If you delayed having children, they may be young and child support payments may derail retirement plans/savings. You may still be faced with funding post secondary education. You may be supporting aging parents. One spouse may already be retired.

Part of divorce is dissolving your family’s joint financial relationship. This can’t be done unless you know the total financial picture. All the facts need to be on the table so you can determine how best to separate your finances allowing both of you to make the best choices of how you will move forward on your own.

This means doing some homework in advance.  As a start, you need to find and prepare the following documents:

  • Tax returns from most recent tax years
  • Recent paystubs that show payroll deductions
  • List of personal property  such as cars, boats, valuable art, jewellery, antiques
  • Recent statement from Assets:
    • Bank accounts
    • Investment accounts including open, RRSP, RRIF accounts
    • Education savings Accounts
    • Other assets such as Stock options, other Company awards
    • Company Pension
  • Recent statements of Debts: Mortgage, Line of Credit both personal and joint, Car loans
  • Miscellaneous Info: Life insurance, Medical benefit plans
  • Business Ownership details

Doing your homework takes time.  Documents may be hard to locate. You may have to request copies from the bank or your employer. You may not have looked at some of these documents for a very long time.

You can hire a divorce financial professional to “tutor” you with your homework. They can help explain and organize it all so everyone is ready to start.

09 May Grey Divorce and the Current Economy

As the ups and downs of  the economy continues, so does the stress on couples considering separation after long term marriage and  facing retirement.

Couples now have to deal with financial issues  that are unique at this stage of their lives.

  • How to pay the bills if both of you are retired ?
  • How to cope with the primary bread winner working less, or not at all?
  • What if your spouse is spending more time at home?
  • How to accept a change in who is the primary earner in the marriage? (Wives making more than husbands is a fast growing trend because more men are being laid off than women).
  • How do you deal with downsizing  to a new home?
  • How to handle the added tension when grown children move back into the home due to their being laid off or not finding a job?

Dealing with these financial realities in an adversarial process doesn’t help anyone in the long run, especially at this time of your life.  Working in a mediation or collaborative setting can help create customized solutions that may ease these financial realities and help everyone transition to a secure future.