What Can All of us Learn About Personal Finance from Divorced Couples?
It’s a little known fact about me–something even some of my close friends and family members do not know. Up until about eight years ago, I used to blog anonymously about personal finance. My website eventually received thousands of unique visitors per month.
When I eventually ran out of things to write, I was able to sell the blog. To this day I believe it remains on the internet with the buyer of the website continuing to blog about personal finance. The primary impetus for me starting the blog was to hold myself accountable for paying off six-figure law school loans.
About a year ago my wife and I achieved one of our primary goals, paying off close to $200,000 in student loans. Other than our mortgage, we are now completely debt free. Personal finance has always been something that has interested me greatly. The methods for debt repayment, savings vehicles, and creating tax-advantaged decisions (coupled with great willpower) is something I find highly fascinating. I enjoy tracking my spending each month, creating spreadsheets, and performing monthly and yearly budget projections. In some ways this has been a great background for me, as a great deal of family law essentially involves family and personal finances.
The Case Information Statement (“CIS”) that the court requires each divorcing spouse to fill out has a Schedule “C” that is essentially a monthly budget. You’re asked to fill out your monthly expenditure while intact and individually down to the tiniest line items such as “toiletries.” You’re also required to list all of your assets and liabilities to help determine a net worth. Statistics and math come into play in negotiating the division of retirement accounts, stock options, rolling over IRA’s and the like.
Again, many people may find it boring but it’s right up my ally. Even better, I have learned a great deal about personal finance from going through numerous divorces with my clients. There are many takeaways that can assist all of us–even those not currently contemplating a divorce. Although I cannot offer any financial advice and this blog post is not meant to do so, here are some of the takeaways I have learned from client’s divorces:
- Be aware of the Family’s Finances. Although one person may take the lead in personal finances for a family, it’s important that both parties understand the financial picture of the family. This is important for a number of reasons, not the least of which is that financial issues are one of the biggest predictors of divorce. It shocks me how many clients come in to initial consultations with no firm grasp on their own families finances. Their not sure if their spouse has a pension or some other type of retirement account, they do not know what the family’s monthly budget is, they are even unsure if the car they drive is owned or leased. They cannot provide a breakdown of their monthly budget, nor can they accurately list the family’s assets and liabilities. It is very difficult to know how to divide assets if you’re uncertain what the assets are. Although discovery will help unearth such issues, it’s something all couples (whether contemplating divorce or happily married) should endeavor to understand. Not to mention, even in an intact household there could be great ramifications if something were to happen to your spouse and then you’d be unaware of assets and liabilities. My wife and I have made it a practice in our household to have monthly discussions of budget and finance and to write down all accounts to banks, etc., so that we’re aware of the financial picture of our household. When you go to an initial consultation for a divorce it is helpful to have copies of all records in advance.
- Work Together as a Team. Not to get pollyanna, but it’s simple game theory that working together (whether happily married or not) can lead to better results for all involved. If you have an uphill battle (like my wife and I did finishing law school and graduate school in 2009 with nearly $200,000 in student loans), then you can either bury your head in the sand or you can team up and fight together. In our case we made a chart with each box representing $1,000.00. Each time our loan balance went down another $1,000.00 we crossed off one of the boxes until our loans were eventually paid off (about 8 years later). If we allowed the situation to stress us out and did not act as a team together, the debt may have negatively impacted our marriage. Instead, by working as a team to find new ways to be frugal and making debt the enemy, the whole ordeal strengthened our marriage. Likewise, even a divorcing couple should be smart about their situations. Maybe you can both agree to remain in the marital house to cut down on the added expenses of having two separate homes. Maybe you can agree to work together in the divorce to negotiate in good faith and to not waste thousands of dollars in counsel fees fighting over furniture that is barley worth $500.00. The more you want to punish the other person in a divorce the more you’re really punishing yourself as well, because of the added costs.
- Don’t be Judgmental. It’s only common that you’re going to have different opinions regarding personal finances. For instance, my wife and I have different tolerances for risk. I like to invest most of our funds in stocks whereas my Wife would prefer a larger emergency fund and to invest a higher ratio in bonds or other safer investments. We work together to find common ground (not always achieved) and we attempt to be supportive even if investments or decisions are ultimately proven to be less advantageous than initially hoped.
- Learn. Although I can’t expect everyone to be a “personal finance dork” like I am, our finances are increasingly important in this modern society. Perhaps you can each take turns learning about new subjects and becoming “experts” on them. Then you can report back to your spouse. For instance, one of you can focus on frugality and budgeting and then the two of you can think of ways to implement the savings.
- Keep Good Notes/Document. Finally (and with tax-season incoming this is more important than ever) it’s helpful to keep good notes and to properly maintain documents pertaining to the household’s finances.
Although personal finance/money issues may not be the cause of divorce in all cases, I have noticed a lack of communication and money stress as being an important symptom leading to divorce for many of my clients. Whether you’re happily married or pursuing divorce, it’s important to keep some of the above ideas in mind to assist in achieving the best outcome for you and your family.
If you’re considering a New Jersey divorce or Family Law action contact me to discuss your options. You can schedule an initial consultation by calling my office at 908-237-3096 or by scheduling your own divorce consultation online by clicking here.