17 Apr How working with CDFA makes a difference in Divorce

I believe one of the most important roles I have, as a Certified Divorce Financial Analyst (CDFA)  is  providing a reality check for my clients before , during and after divorce. I am pragmatic and not judgmental. I take the words in settlement agreements and turn them into numbers.  .

Firstly,  I do this  by having a systematic approach  for  pulling together the financial numbers  and information that  they need to start separation discussions whether the are working in mediation, collaboration or traditional negotiations.

Secondly,  I’m focused on finding solutions that work in both the short and long term.  I create projections based on clients goals and possible settlement options , whether that be proceeds from sale of their house , impact of  varies duration and levels of support, impact of future income and savings. These projections  educate and show clients  the  future implications of  what is being proposed. They also show the  the impact of  other decisions clients  have control .

I had a client who was the main breadwinner of the family. She went back to school to upgrade her skills when her husband was downsized from  his corporate job. She found a very well paying position and  has had a number of promotions since starting at  her company. Her husband  found it difficult to get back into the workforce in his previous role. Discouraged, he  started a small consulting practice  but wasn’t having much success in getting clients.  When they decided to separate, her income was substantially more than his. She was very resentful of having to make Spousal Support payments to her husband.  This looked like it was going to stall the settlement negotiations.  I worked with her to understand her current & future spending, her future income   and have her see the impact of various levels of support. I helped her set priorities going forward.  Once  she could see into her financial future,  she agreed to a spousal support payment schedule she  and her spouse could live with  as she now  felt confident about her own financial future.

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.

11 Jan Retiring and Divorcing at the same time?

Thought your retirement would be like this?

Thought your retirement would be like this?

But instead it turned out more like this?

But instead it turned out more like this?

The baby-boom generation is showing that it ‘s never too late to consider divorce.  As our life span extends,  people in their fifties and sixties with better health expectations figure they have a number of good years left. Why not live them to the fullest?  That may mean ending their long term marriage and going it alone.

The problem with getting divorced late in life, is that most people find it hard enough to save for retirement and don’t imagine living off of just half of their savings, whatever they may be.

If a couple had money in the marriage, there may be enough  money to go around after divorce.  The challenge is for normal middle-class couples who just scraped by.  Or those couples who lived beyond their means.  When they try to make their house and retirement assets cover two households instead of one, there’s simply not enough to go around.  And they’re not likely to go back to work.  They may be expecting to do the things they never allowed themselves to do while they were married like join a club, travel etc.

When people are relying on a pension or savings, there’s never going to be enough to duplicate the marital lifestyle.  If you’re divorcing at  55 or 60, it may be too late to go back to work or  too late to recover financially.

If you didn’t consider that divorce would be par t of your  retirement plan,  you may want to  work with a divorce team that consists of  both legal and financial professionals. They are there to help you navigate this difficult time, both in a legal and financial capacity.

Image courtesy of Ambro at FreeDigitalPhotos.net <http://www.freedigitalphotos.net

11 Dec Dividing Property in Divorce

ID-10071842Deciding how to split assets is more than just dividing the values on paper.  People often make the mistake of believing that dividing everything in half is the simplest and fairest way of handling things.  This is not necessarily true.  People need to pay attention to the decisions they make about dividing property and consider the long term consequences.

Assets differ in a number of ways.  Some are liquid like cash.  Some assets like RRSP accounts are tax deferred.  Some assets need to be valued in a specific manner according to family law rules and regulations.  Investments may have a different value after taking into account possible capital gains taxes.

Sometimes assets have an emotional connection that may have more worth than the actual dollar value such as a house, business, or family heirloom.

Assets may have costs to consider.  A couple may have a $400,000 investment  account and a house worth $400,000 (mortgage free).  The assumption is that if one spouse takes the house and the other takes the cash, this results in an equal division.  Keeping the house has costs such as property taxes and upkeep and maintenance. The investment account will be growing over time earning interest. It may not seem quite the equal split over a period of time.

Debts are also part of the division of marital property.  Allocating debts in divorce may mean paying them off, refinancing, or applying for new debt.  Different types of debt carry different fees, charge, penalties and terms.   Just because you have $10,000 left on your car loan and $10,000 credit card debt doesn’t mean that the car loan should go to one spouse while the credit card debt goes to the other.

Divorce settlements are often agreed upon with limited insight into the long-term consequences.  As a result, settlements that seem to be fair and workable initially do not necessarily stand the test of time.  Therefore, it is highly recommended that a divorce financial planner be brought into the process so that you can see how decisions you make today will affect the rest of your life.

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

15 Nov Financial Literacy Month Quiz!

 

November is Financial Literacy month  in Canada,  http://www.financialliteracymonth.ca/ 

We experience dealing with money at an early age.  From getting money from the tooth fairy, saving coins in our piggy bank and opening our first bank account with allowance or birthday money.  We also learn how to spend money quickly.  Because we have experience with money throughout our daily lives, it doesn’t mean that we have  acquired the knowledge and skills to make responsible financial decisions.  After all, money doesn’t come with instructions.

When facing divorce, it’s crucial to acknowledge what level of financial literacy you have.  Take this simple quiz to assess your financial health:

http://www.womenindivorce.ca/womenfacingdivorce/tools/checkingmyfinancialhealth.html

 

Image courtesy of vichie81 at FreeDigitalPhotos.net

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

03 Oct Next Divorce Talks Topic – “Tips for Gathering Financial Information in Divorce”

It looks like you’re separating. One of the first steps you’ll be required to do is pull together your financial information … assets, debts, income, expenses.

Where to start? What is required? Where will it be used?

Join us for an information session that will have you learn:

What specific information you need t

o gather
Why this information is required and where it fits
Practical tools for making the information gathering easier
If you or someone you know is contemplating divorce, join us for a discussion about how to best deal with financial information in separation and divorce.

DATE: Wed. November 14th,  2012
TIME: 6:00 to 7:30 PM
LOCATION: 79 Shuter St. Suite 200 Toronto

http://www.eventbrite.com/event/4029811274

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!