Simple Divorce Advice

By Sandy Arons

Men Also Make Financial Mistakes

Men make plenty of their own financial mistakes during divorce. However, men typically earn more than their wives so the negative impact of their decisions is blunted. With male clients it is equally imperative that they have a complete list of living expenses and understand tax issues (including, but not limited to, capital gains taxes on investments sold and penalties for early withdrawal from retirement accounts.) Otherwise, good intentions or a guilty conscience could cause the husband to agree to a settlement that he can’t afford. Then, he and his ex-spouse will be back in mediation or court within two years and the drama/expense of divorce continues.

Mistakes Grow Over Time

The cumulative effect of common financial gaffes like those mentioned in this article can be devastating. For example, IF:

• monthly expenses are underestimated by as little as $300

• unexpected monthly expenses (car repairs, etc.) average $167

• and alimony taxes of $225 are not included in the monthly budget

the immediate impact will be monthly expenses that are  $692 more than planned and $8,304 ($692 x 12) of added expenses in the first year.

Effect of Mistakes On Your Budgeted Expenses

In five years, a 5% annual inflation rate will add $862 -a-month in unplanned expenses by Year-5. The monthly budget shortfall will increase to $1,554 and the five-year total shortfall will be $66,750. These calculations provide a concrete example of how small, short-term mistakes can have big, long-term consequences and they validate the statistics mentioned earlier in this article.

Cumulative Effect of All Unplanned Expenses

Keep in mind the deficit of $66,750 (in the table above) during a five-year period does not included:

• the costs of keeping the house,
• foregoing the doubling of tax-free retirement funds,
  • pension funds lost as a result of unknown restrictions on division of assets,
• or lost funds due to unknown capital gains taxes.

Clearly, the financial issues of divorce, such as those dealing with retirement funds and tax treatment, are complex. A complete discussion of these issues will be the subject of Part II of this article.

If you are in the middle of a divorce, you are making the most important financial decisions of your life. These decisions will change you and your children for the rest of your lives. The legal aspects of the divorce are the responsibility of your attorney. The financial aspects of your divorce are your responsibility. We encourage our clients to take the time to understand the numbers and to secure their future and their children’s future. Don’t just get a divorce, get a financially smart divorce.

To Read Part 2, Click Here!

By Sandy Arons

MBA, Certified Divorce Financial Analyst

Certified Financial Divorce Practitioner, Certified Financial Divorce

Specialist, Financial Counselor & Mediator

ARONS & ASSOCIATES DIVORCE PLANNING

www.getasmartdivorce.com

615-376-8204

See original: Financial Mistakes to Avoid During Divorce. Part 2

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