Marriage is like every other uncertain business. It is a path that is dotted with mires, thorns and thistles and yet can be a haven of bliss.
Therefore, it is often not out of place for to prepare for both ends of the stick: pleasant and the unpleasant. In the case of the latter, the couples may to opt for a break up or separation.
Whatever the decision any guy who has gone through a divorce, would always feel a special need to help those who are about to go through that process or who have gone through it and are in the process of rebuilding.
One divorcee has joked that prior to the divorce, he was on track to retire by 55 and live very comfortably, and after the divorce, he thought he was on track to retire at 85. “But…I’ve never been happier! Is a smile on your face and a lighter mental burden worth an extra 20-30 years of working? For me, the answer is a clear YES, but so many others wrestle with that question for years before either remaining in the marriage or going through a divorce.”
According to the divorcee, he has spoken to a number of people recently who are not sure which direction their marriage is going. They wanted some ideas on how to be prepared financially so that they are not devastated or blindsided by things that could happen if the marriage ended in divorce. He hopes that they can work on fixing whatever is wrong in the marriage, but if they go down that path, he recommended solution things that some divorcees wish they had determined in advance before the breaking up with their spouse. Here are his thoughts:
In my divorce, there was an enormous amount of time spent on arguing about the value of my boat. I lived on it for the first 3-4 years after we ended the marriage and I thought it was worth far less than my ex thought it was worth. Boats are a non-essential item and after the housing collapse, stock market collapse and abysmal economic recovery, boat values dropped substantially. I know people who bought boats in the mid-six figures and can’t give them away right now. (Between maintenance, slip fees, gas and insurance, boats are not low-cost items.)
Each spouse should complete (separately, without comparing notes) a financial statement (long form) from a court or this net worth & budget worksheet. This will be an important part of any financial settlement and could help identify areas where spouses view things differently. If one spouse has an asset that is valued at $10 and the other has it valued at $100,000, there is an obvious discrepancy here.
A resolution to that situation prior to a court ordering an independent valuation can be a major cost saving and can also prevent months and months of delays. (Delays are costly….trust me on that one!) Similarly, if one spouse has an asset (such as an interest in a family-owned beach house) on their sheet and the other spouse does not, filling out this form can help reconcile the differences prior to mediation or litigation.
What is going to happen with the primary residence?
Again, this was an area of contention in my divorce. The smart thing to do financially would have been to sell the house and for each of us to buy smaller places in the same school district. My ex, however, grew up in the neighborhood where the house is located and she was committed to staying there.
My initial thought was that she wouldn’t be able to make that work financially (What do I know? I’m just a financial planner) even with alimony and child support thrown in. She was given 3 years to refinance to get my name off of the mortgage. However, in those 3 years she apparently had some other financial things happen that caused her credit score to drop and she couldn’t get approved for a refinance on her own. So I was stuck on the mortgage, and when she missed mortgage payments, my credit score took a big hit.
That created a problem for me recently when I was applying for a mortgage on my current house. In retrospect, I should have fought harder to make the refinance happen instantly or else sell the house. I was more concerned with not disrupting my kids’ lives than with my credit score and it has caused some longer term irritation.
The house is usually the #1 financial obligation in most marriages, and having a well thought out game plan for what to do with it will save you from headaches down the road. Know what your current costs are and what your future costs will be if you move out of the existing house and either buy another home or rent a place. Americans spend a large percentage of their income on housing, so using a divorce as a way to downsize your housing costs can prove to be a spectacular long-term decision.
To litigate or mediate
My ex and I did a full-blown litigation since only one of us wanted to mediate or collaborate. We are all entitled to our opinions and our own decisions, but at times those decisions can be rather costly! If at all possible, working with a mediator or collaborative divorce attorney can be far easier and less expensive than a full-blown litigation.
Having a conversation with your spouse (or soon-to-be-ex spouse) about this in a calm setting where you can make clear headed decisions can be a tremendous cost saver.
If you are looking for a mediator, here are some things to consider. And for those who haven’t heard of collaborative divorce, here’s a quick primer on it. Either mediation or collaborative divorce can lead to a far friendlier, more positive and less expensive outcome than traditional divorces that go to litigation.
This one sounds simple and maybe basic, but far too many people don’t know what the “day after the divorce” looks like. In working with someone who is just starting the mediation process, we determined that she would not be able to afford her home. She is now considering selling the house and using the equity to buy a small condo that could be paid off in 10 years after the divorce.
She’ll actually be closer to her retirement goals as a single woman than when she was part of a two-income marriage! Using the net worth and budget worksheet to project what life looks like post-divorce will help guide some decisions about where to live, what expenses might need to be minimized, and if there are things that need to just flat out be eliminated. It’s tough to picture this, but it’s worth the effort.
Divorce is costly as it is. Not preparing in advance can only make it more so. If you are in the process of contemplating a divorce or are in the early stages, taking these steps could help you walk through the process with as little damage to your long-term goals as possible.
Michael Smith contributed this to Forbes Magazine