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When you’re going through a divorce it can be a scary time, and one of the places that I find people are most scared about is their finances. Now, some people come into their divorce already having a financial planner or advisor that has helped them understand their financial situation, but I find that for many people they’ve never thought about divorce and financial planning before.
My husband is a financial planner, so that’s something that I’ve always thought about, but I know that most of my friends don’t have a financial planner, and if they were going through a divorce, they would need to better understand how divorce and financial planning go hand in hand.
It seems that a lot of times people only think that you need financial planning if you have a lot of money or assets that you need to manage. However, the opposite is true: everyone can benefit from financial planning, no matter where you are at in your life. However, it’s even more important if you’re going through a divorce because you need to understand what your current financial situation is and what it might look like and how to plan for moving forward without your spouse.
Divorce and Financial Planning
According to the CFP® (Certified Financial Planner) Board, financial planning “involves looking at a client’s entire financial picture and advising them on how to achieve their short- and long-term financial goals. From saving for education and planning for retirement to effectively managing taxes and insurance, financial planners develop valuable relationships with their clients to provide them with confidence today and a more secure tomorrow.”
When you’re going through a divorce, you’re going to want to think about all of the items discussed above and to be able to feel secure about your future. As I mentioned above, some clients have doing financial planning before, and your planner may be able to help you with your divorce and financial planning whether that’s for you and your spouse individually or just for one of you. It’s important, however, to decide whether you want to continue having a relationship with the same advisor that you worked with while married. You may feel that you weren’t very involved in working with them and aren’t sure whether they’re the right fit for you.
As a mediator and attorney one of the referrals that I make the most often is to a CDFA® (Certified Divorce Financial Analyst) who is someone that can help them with the divorce and financial planning. This could be an advisor that you continue to work with after the divorce or I am also often making referrals to professionals that can do financial planning once the divorce is over.
Certified Divorce Financial Analyst
As discussed above, if you’re looking to do financial planning during your divorce, I would highly recommend that the adviser you work with is a Certified Divorce Financial Analyst. While there are certainly some financial planners who would be able to help you no matter what you’ll want to make sure that they’re comfortable working with you during the divorce and financial planning for what you need while you go through mediation.
The first important thing is that in California, you and your spouse are required to do full financial disclosures (referred to often as your PDODs or Preliminary Declarations of Disclosures) where you are going to disclose all your assets, debts, income and expense to each other. Now besides this being a legal requirement that no one can get out of its important because that is how we know what financial issues we need to discuss. Often this can be incredibly difficult to understand what assets you and your spouse has. So, a place where a Certified Divorce Financial Analyst can come in and help is by assisting you in better understanding what your marital estate looks like and what you may want to keep moving forward. You may think that all assets are created equal, but that isn’t necessarily true and through financial planning you should be able to understand what assets would be most beneficial for you.
Another important area of divorce and financial planning is budgeting. When you’re completing your PDODs, a part of them is completing your expense documentation, which we use especially to discuss support and what that may look like. I find that many people have never budgeted before and may not even know the first place to start in figuring out what their budget should be moving forward. While we have an expense spreadsheet that we provide to our clients to fill out, sometimes they need additional help in even figuring out what things have cost them. I usually advise clients to start out by filing out the budget with everything they would spend money on if money wasn’t an issue. From there, we often have to go through and discuss about cutting expenses for both parties based on the amount of available income.
If you are getting ready to go through a divorce or already in the midst of one, it’s important to think about and understand how divorce and financial planning can and should go hand in hand. Contact West Coast Family Mediation Center for a personalized consultation.
by: Amanda Singer, Esq., MDR, CDFA®
