Articles

Many people getting divorced fail to do any real financial planning as they go through the process. They basically are saying, “I’ll see what I end up with and make do”. However, sitting down with a financial adviser to start planning for your post-divorce life can be helpful in several ways.

First, they can help you decide what you need most out of the divorce, allowing you to better focus your negotiations. For instance, the financial planner might help you determine that your priority needs to be on establishing cash flow, and help you determine what your reasonable cash flow needs are.

Second, they can help you make decisions about what is the best form to take your settlement in. Every person’s needs, goals, and concerns are different. Making informed decisions about the right balance between cash flow, liquid assets, and retirement assets can help you negotiate the mix that leaves you best positioned to move forward with your life. You want to be sure you have planned for meeting both your short term expenses as well as your long term needs. Sometimes keeping the family home can be a very smart decision, and other times it can be a very bad decision. Similarly, taking as much as possible of your settlement in retirement funds might be a good or bad decision, depending on your circumstances. Finally, it is important to understand tax and other financial implications of different classes of assets, so that those factors can be considered in the negotiations. For instance, $1 in a pre-tax account is not really worth the same as $1 in an after tax account.

Third, they can help you start making plans for how to make your settlement work best for you. How much of your settlement should be put into long term investments? How much should be kept liquid? Should you hang on to the house or sell it? Should you rent, or buy a new home? What is the best way to save for your children’s college, and can you afford to? These are the kinds of issues that a financial planner can help you work through. Not only do they know much more about the right questions to ask, but they have a wealth of information and resources to assist you in making intelligent decisions.

Any good financial planner should be able to help you put together a good post-divorce financial plan. You may want to consider going a step further and hiring a Certified Divorce Financial Analyst (CDFA). A CDFA is someone who has taken specific training in financial issues in divorce. Some people who do this work can be found here.