March 24, 2010 by wendy.

Experts have said that the two biggest reasons for divorce are money and sex for first marriages, and blended family issues for second marriages.  I am not a therapist, and although I do not inquire about “what went wrong” with the marriage, clients often volunteer such information in the course of our meetings.  During the decade or so that I have offered divorce mediation and financial analysis services, I have certainly seen sex and money as probable primary causes.  However, during the mid-2000s, I also saw more “control issues” as root causes, in that one spouse often felt that the power imbalance was too great. Often clients would tell me that their spouse was too controlling, bossy,  wanting to run their lives, or to be in charge of everything, even the minutia of daily living.   

In 2008, I was seeing more couples getting divorced because of money issues.  Often one person was spending more and their partner was uncomfortable about the spending, feeling it was too lavish, too risky, and uncontrolled.  The person spending often felt that their partner was a cheapskate and overly concerned and controlling of money.   One client told me that she wanted out of the marriage before this “house of cards falls,” and she didn’t want to be anywhere near it when it collapsed.  I felt that many of these clients were seeing ahead quite clearly about the future of their personal financial situation, even though they were not aware about the impending downturn in the economy.  I was also seeing more clients on the edge financially, and so I was referring several of them to bankruptcy attorneys for assistance and advice.

In 2009, my divorce workload was down from 2008, and family law attorneys also told me that their caseload was much lighter.  Articles in journals indicated that more people were opting to stay married, at least for a while.  After talking with clients, attorneys and other divorce professionals, it confirmed the assertion of these articles that people were staying together instead of divorcing.  Indeed, many people were either too afraid of the horrible economic situation that America was in at that time, or they felt too poor to get divorced.  Therefore, they chose to stay together and try to make things work, at least until they were more financially stable.  That made sense.  If one party is out of work and the couple has children, it is pretty difficult to divorce and pay for separate households with 50% or more of the income gone.  Moreover, many couples found their house values were worth less than their mortgage balance, and that they would not be able to sell the property without taking a huge loss.  Many others were simply overextended with their credit cards, and moving towards bankruptcy. 

Fast forward to 2010.  I am seeing a new stream of couples coming to see me to help with their divorces.  They usually have the funds to get divorced, and their economic situation is not dire, but their personal relationship has fallen apart for any number of reasons.  I don’t know if this is beginning a new trend or not.  We’ll see how the rest of the year goes – other reasons may be revealed.  With the economy recovering slowly and the unemployment situation still dire, I think that money will resurface as a primary cause of divorce for the next year or two.

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July 17, 2009 by wendy.

The last blog I wrote discussed the fact that many people may be too poor to get divorced.  A new twist was described recently in the Wall Street Journal article, dated Monday, July 13, 2009, and titled “What God Has Joined Together, Recession Makes Hard to Put Asunder.”   The author, Jennifer Levitz, interviewed several couples that have gotten divorced, but still live in the same house.  The reason for this situation is twofold:  one of the couple is unemployed and/or they are unable to sell the family house.  According the couples interviewed, they seem to manage their lives OK, even if it is awkward at times.  Certainly it is not a desirable situation, but they have chosen to reside in the same house at least until their financial situation improves.  I saw this situation occur with clients in my practice.  They are still living in the same house, and trying hard to make a difficult situation work, with varying degrees of success.

Ms. Levitz also discusses the fact that couples are delaying the decision to divorce, even though their relationships are not working for several reasons – some are uncomfortable at being single during this recession, or they are waiting until economic times improve.  I found that a similar prevailing sentiment developed after the September 11, 2001 attack and persisted throughout 2002.  After that, the economic situation improved, and people began filing for divorce once they were more financially comfortable.  Eventually couples found a way to dissolve their marriages if they wanted to do so.

Some ideas for people stuck in this situation:

1.      Work on your relationship.  Spend some of the time actively trying to improve your relationship with your current or ex-spouse.   Get professional marriage counseling help if you feel you need it.

2.      Jointly develop some rules or guidelines – about sharing household tasks, respecting privacy, dating, and parenting, for example.  A professional mediator may be able to help you work through these issues and to jointly develop a plan for living together until you can physically live apart. 

3.      Schedule some separate time.  Try not to spend a lot of time together if the togetherness makes your relationship worse.  Find activities to perform in the house that you will do separately, or schedule outside activities with friends and family if possible.

4.      Work on your finances.  Prepare a budget and stick to it.  Cut expenses where you can – be creative!  Review your assets and your liabilities and reduce your debt where possible.  Do a “what-if” budget assessing your expenses for if and when you divorce.  You will need to know this information anyway to make good decisions about dividing marital assets when you do decide to divorce. Contact a financial professional experienced in divorce matters if you need help.

Do you have any other thoughts on how to handle this situation?  If so, please let me know!

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May 14, 2009 by wendy.

Divorce is one of the most stressful of all life events.  Stress can create insomnia, illness, and often impedes objective and critical thinking.   Having one or more of the stress-related issues is not conducive to decision-making, especially when these decisions can impact the rest of your life.

I asked a colleague of mine to comment about the use of exercise to reduce stress. Marta Burns, who teaches classes in karate, told me:  “It all started when a good friend of mine and well- known counselor in Denver (Bernadine Merker), called me up and said she would like me to work with people that she counseled.  I asked myself “Why?”  I then realized there are many benefits my karate class offers and that I could give a new meaning to my work and teaching – that is helping others in need.  The confidence in my body and mind, is, in fact a skill set that I can teach to others.”

People say a divorce can be one very traumatic and scarring experience in life. A divorcing person is now facing the world alone, rejected by the one person they could always trust. Regaining ones’ confidence of mind and body is an essential part of the recovery process.

Marta further told me about the many benefits of a karate class.  “Karate is designed to teach individuals a variety of techniques that allow them to protect and defend themselves. It is a great feeling of empowerment to know you are able to defend your self and think on your feet. This is not the only benefit that karate offers. For example:

1)                 Karate drills and exercises structure can result in a great release of anger and stress.  Much like when you were a child and punching your pillow made you feel better, in the

            same way karate shield drills and other stamina exercises let you feel calm, peaceful and more centered.

2)                 Another benefit that comes with practice is more physical capabilities and a better look and feel to your body. A strong self-image always projects into others aspects of life.

3)                 Karate practice redirects your thinking towards new goals: confidence, health, physical abilities, meantime giving you the confidence of a new family and loyal friends as you

            train with others like you in class.

4)                 Karate uses physical exercise and training to instill confidence and calm while at the same time providing the feeling of insulation and supportive family structure thru the Karate

            class.”

If you have any questions about karate or her classes, please contact Marta Burns at:

Sensei Marta Burns

Kyokushin Karate

www.satorydojo.com

720-338-9780

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December 11, 2006 by wendy.

   Some people believe that a divorce settlement should be precisely 50/50.  Generally, an equal settlement for each party is often the result, but a case can be made for more or less, depending upon the circumstances of the couple.  More about that in another posting.  The 50/50 proposition, however, can be taken too far.  I have seen couples who divide up each of the IRAs and various accounts, and create a lot of unnecessary work and expense.  Sometimes the division of assets in a 50/50 spread also creates unexpected and unpleasant tax results.

   If a couple is trying to achieve a 50/50 settlement, each can trade assetsfor other.  For example, one person could take all of the IRAs and some additional cash, to make up for the amount the other spouse would have in a 40lK plan.  This could save money and effort of writing Qualified Domestic Relations Orders, with the result of a 50/50 settlement without all of the extra paperwork and complications.

    Moreover, depending on their circumstances, one person might need more cash, and less retirement funds, or need and want the house in lieu of the IRAs.  Trading assets between a couple is often a good way to settle things without going to court.  However - a divorcing person should take care not to give up assets that could be potentially more valuable than the stated dollar amount (such as 40lks or pensions).  If a person does trade assets that have more potentialfuture value, the divorcing person should  have very carefully considered their options, or should have received an incentive (such as extra cash) to make up for the possible “lost opportunity cost”.

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September 25, 2006 by wendy.

You’ve Received Your Divorce Settlement – What Next?
 
The divorce is final, and you are fortunate.  You have received your share of your marital assets.  What do you do next?  Did you know that many divorcing people burn through their settlement money at a rapid rate?  Without up-front thought, many people end up with almost none of the settlement remaining after two years.  Worse yet, some have accrued even more debt than they started single life with. 

 
The reasons for this vary.  Some individuals use money to help them with the emotional turmoil they may be going through.  Others are not accustomed to having or handling larger sums of money.  Money can seem to burn holes in some pockets, and can drift away much quicker than most people realize.  Regardless of the reason, emotions can prevent many people from making good financial decisions.  How can you avoid this? 

Take the time to review the following areas and begin planning for you future. 

• Consider having a cooling-off period where no major financial decisions are made.  Experts involved in counseling individuals who have received “sudden money”, such as inheritances or lottery winnings, advise that their clients make no important financial decisions for 6 to 12 months.  This gives the individuals time to plan for their future and not rush into decisions based on emotions.
• Be wary of relatives and friends who may request loans or expect gifts.  If your settlement contains a significant amount of cash, some acquaintances or family members will have no qualms about requesting monetary assistance.   Most financial experts suggest that you wait, if possible, to loan money or provide gifts until after you have assessed your own financial situation and you can consider the relative’s or friends’ requests in less emotional time period.  It is okay to tell the requesters that your money is “tied up” and you are in “time out” until you have finished your long term planning. 
• Estimate your cash flow, one of the most important causes of anxiety in most people.  Set up a worksheet, on paper or in a computer program, using three columns.  The first column contains your fixed expenses that must be paid regardless, such as your mortgage, insurance, taxes, car payments, etc.  The second column should contain your flexible expenses that are required for living but may vary and over which you have some control, such as food, dining out, clothes, and others.  The third column should contain expenses which are truly optional and on which you may or may not elect to spend, such as vacations, entertainment, and social activities. Most of these expenses are probably identified in your Financial Affidavit that you were required to prepare for your divorce.  Summing these figures can give you a working range of your required monthly cash flow requirements.
• Understand your lifestyle changes can impact your finances.  Many couples have found that it is difficult to live on two paychecks, and with a divorce, each will be living on a single paycheck, with some duplicated living expenses (two mortgages or rent payments, two telephone bills, etc.)  Returning to the workforce may require day care expenses for the children, lunches out, additional car expenses, and purchase of additional work clothes.  For some, entertainment expenses may increase.  Be certain to monitor your cash flow situation monthly to determine if it has changed, and if you need to adjust your spending habits.
• Taxes can play a large role in finances.   You will want to contact your tax consultant to determine if your income tax withholding should change, based on your marital status, credits for children (if any), receipt or payment of spousal maintenance (if any), etc.  Additionally, the sale of a house or investments can trigger capital gains or other taxes.  For example, if you sell the $200,000 house you purchased in 1995 for $900,000 you very likely will owe taxes on the gain.  Discuss how much you will owe with your tax consultant and be certain to set aside an appropriate amount to cover this expense.
• Retirement accounts represent an additional “bonus” because of the tax deferral benefit.  These are very valuable assets and because of the tax implications, require special care.  The IRS allows distributions from some types of retirement accounts that are free from the 10% penalty for early withdrawal, if accessed in the correct time period.  Income tax is still required to be paid, so if you have made such withdrawals, be certain to set aside additional funds to pay taxes.  Otherwise, most financial advisers recommend rolling over (in a trustee to trustee transfer) the retirement accounts to accounts of the recipients choosing.  See your financial advisor for assistance, if you need it.
• Having an emergency fund is critical even if you currently have sufficient funds available.  Most financial advisors recommend 3 to 6 months of expenses, and for some, even more if their income situation is somewhat fragile, or they receive income erratically.  Always keep such funds in accounts such as money market funds, certificates of deposits, or savings accounts.
• Growing your money is even more important after the divorce.  Because you have only one income on which to rely, it is important to ensure that your current funds are working for you.  Additionally, planning for your retirement is critical.  While it is natural to be concerned about the short term, planning for your future is at least as important!  If you don’t have the knowledge about investing, take classes, read books, do research, or ask for help from your financial advisor.

Getting a divorce entails a significant amount of work and financial assessment.  Let’s say you have reviewed and regularly monitor your cash flow, have fended off relatives and friends looking for loans, and reviewed your lifestyle changes.  Additionally, you’ve assessed your tax situation, rolled over your retirement funds to your own account, developed an emergency fund, and situated your money so it can grow for you and your retirement.   You are now on the path to a successful future and have made your divorce settlement work for you!

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