“The Seven Financial Mistakes to Avoid in a Divorce”
Contributed by:
Nicole N. Middendorf, CDS, CDP
Certified Divorce Planner
Certified Divorce Specialist
LPL Financial Advisor
3030 County Road 101 N
Plymouth, MN 55447
Phone: 763-208-0482
January 7, 2003
When it comes to divorce, knowledge is power and
you want to have knowledge about your whole financial situation. Here are the
seven things not to do when considering or involved in the divorce process.
Do not leave everything up to the other spouse:
Understand your financial picture. Prepare
yourself for the divorce by gathering all of the financial records you can. You
should have copies of brokerage account statements, retirement accounts,
insurance, social security, and tax returns. Make sure you get copies of all
statements, close credit card accounts with a zero balance, start establishing
your own credit, etc. Take care of all
those things you have been putting off: doctor appointments, car maintenance,
stocking up your place full of groceries, clothing for interviews, etc. Do
anything and everything so that you are not financially vulnerable.
Do not become “house poor” – this is taking the
house and nothing else. You want to find the balance that will
work for you and your financial plan for the future. Understand the assets
involved in your divorce and how they work. Remember that some assets are more
liquid than other assets. There are four things you need to financially survive
a divorce and you want a balance of each: a place to live, little or no debt,
retirement assets and liquid money. It does not make sense to stay in the home
if you cannot afford the mortgage or lifestyle and give up retirement accounts,
which may be more valuable.
Do not make decisions based on emotions.
Separate your emotions from your finances. This is one of
the hardest things you will have to deal with going through a divorce.
Understand the value of each asset and keep that in your mind. Understand that
the Barbie doll collection that you have had since you were a young child is a
Barbie doll collection worth a certain dollar amount. It is not worth fighting
over items because of an emotional issue.
Listen to your friends, family and kids but make
decisions that you feel are the right ones, do not make decisions based solely
on what your friends and family feel you should do. Use
professionals to help you understand your options, but rely on your own
judgment to make the final decision. Trust your instincts not what your friends
say. Pick an attorney that is right for YOU, not your friend. This is your
life, not your friends’ life.
Do not think you can do this alone - educate
yourself. Utilize the community resources and
professionals that deal with divorces every single day. These attorneys,
psychologists, financial advisors, CPA’s that specialize in divorce know the
ins and outs. Utilize them.
Don’t forget your future - project your
settlement out into the future to see the effects of the decisions you make
today. Look at how your divorce settlement will affect
you immediately, but also five, ten, fifteen and twenty years from now. This is where a financial planner focusing
on divorce can help you understand your financial future.
Do not forget to change the beneficiaries on
your IRA’s, 401(k), etc. When the divorce is over that is when the
work starts. Once you have your decree in hand, the work of your divorce
is not over. This is where it starts. Do not just let things go to the wayside.
Take initiative to have the assets that are yours as part of the divorce be
divided. Take any retirement assets and roll them over into your own IRA.
Change the beneficiaries of any accounts that you have open. Make sure all
beneficiaries are changed immediately on insurance, work retirement plans,
wills, etc.
Securities
offered through Linsco/Private Ledger. Member NASD/SIPC.
Ó 2003 Strategic Financial, Inc.
