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If you are going through a divorce, you might be feeling anxious about how to deal with spousal maintenance. Spousal maintenance, also known as alimony, is a payment that one spouse makes to the other after the divorce to help them maintain a similar standard of living as they had during the marriage. The amount and duration of spousal maintenance depend on various factors, such as the length of the marriage, the income and assets of each spouse, the age and health of each spouse, and the earning potential of each spouse.

The stereotypical spousal maintenance case is where one spouse stayed home with the kids while the other spent a decade or more advancing their career and now that there is a divorce the stay-at-home parent is going to fall off a financial cliff (because they have little or no income potential) unless the career spouse helps them out financially.

While it may be tempting to rush through negotiations and reach a quick agreement, taking a methodical approach to budgeting and comparing incomes and expenses can save you time, money, and potential regrets down the line, especially when figuring out spousal maintenance.

The Pitfalls of Cutting Corners:

When faced with the daunting prospect of divorce negotiations, it’s only natural to want to expedite the process. However, hastily reaching an agreement without delving into the intricacies of your financial situation can prove to be penny wise and pound foolish. By avoiding the necessary work and disregarding a comprehensive assessment of incomes and expenses, you risk making uninformed decisions that may later backfire.

Fear as a Driving Force:

One of the main reasons individuals may be inclined to cut corners is the fear of what their spouse might ask for in terms of spousal maintenance. This fear often leads to a desire for a quick resolution, even if it means sacrificing a thorough understanding of your or their financial situation. However, succumbing to this fear can be counterproductive and end up costing you more time, money, and emotional energy in the long run.

The Benefits of Methodical Budgeting:

Who wants to create a budget?  Hardly anyone!  But ask any Family Law Attorney and they will tell you that budgets are the key to figuring out spousal maintenance.  Engaging in methodical budgeting and comparing incomes and expenses can yield numerous advantages during divorce negotiations.

Let’s take a closer look at some of the key benefits:

  1. Informed Decision-Making: By thoroughly understanding your financial circumstances, you gain the ability to make informed decisions regarding spousal maintenance. This ensures that any agreement reached is fair and reasonable, taking into account both parties’ needs and financial capabilities.
  2. Transparency and Trust: Demonstrating a commitment to a methodical approach fosters an atmosphere of transparency and trust during negotiations. By openly discussing and analyzing the financial aspects of the divorce, both parties are more likely to feel heard and respected, leading to a higher likelihood of reaching an amicable agreement.
  3. Long-Term Financial Stability: Rushing through negotiations without a comprehensive understanding of your financial situation may result in an unsustainable spousal maintenance arrangement. Taking the time to carefully evaluate incomes, expenses, and future financial prospects enables you to create a plan that promotes long-term financial stability for both parties involved.
  4. Minimized Legal Costs: While investing time and effort in methodical budgeting may seem time-consuming at first, it can significantly reduce overall legal costs. By proactively addressing financial concerns during negotiations, you reduce the need for repeated revisions and potentially costly legal interventions down the line.

Divorce negotiations are rarely easy, but by embracing a methodical approach to budgeting and comparing incomes and expenses, you can pave the way for a smoother and more satisfactory resolution. Rather than succumbing to the fear of what your spouse may ask for in spousal maintenance, investing the time and effort to fully understand the financial landscape can lead to a fair and reasonable agreement that benefits both parties in the long run. So, take a deep breath, roll up your sleeves, and embark on the journey towards a well-informed and amicable divorce settlement. Your future financial stability is worth the extra effort.

You should consult with a lawyer who can advise you on your legal rights and obligations regarding spousal maintenance. You should also consider working with a financial planner or Certified Divorce Financial Analyst (CDFA) who can help you create a realistic budget and plan for your future. You should also seek emotional support from your friends, family, or a therapist who can help you cope with the stress and anxiety of the divorce process.

By making informed and rational decisions about spousal maintenance, you can achieve a fair and reasonable outcome that respects both your and your spouse’s interests. You can also avoid unnecessary conflicts and drama that can prolong and complicate the divorce process. And most importantly, you can protect your well-being and happiness after the divorce.  Remember, being penny wise and pound foolish rarely pays off in the complex realm of divorce negotiations.

Carl Arnold is an experienced family law attorney and mediator. He currently focuses his practice on Family Law Mediation (including child-inclusive mediation), Collaborative Divorce and Custody Evaluations. His office is in Northfield, Minnesota and he works with people from all over the state using Zoom. Carl has been a long-time member of the Collaborative Law Institute.

Attorney/Mediator, Arnold Law and Mediation LLC, carl@arnoldlawmediation.com
507-786-9999
www.arnoldlawmediation.com

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Friends for lifeYour divorce is over. It’s time to start sorting through all the things you need to do, to get your financial life in order.  Here are just a few tips to help you thrive financially, as you move into this phase of your life.  Pay Off Credit Card Debt One of the most important steps to achieve your financial goals is eliminating credit card debt. Start by paying off the balance of one credit card at a time, by either:
  • Paying off the highest interest rate credit card first, or
  • Paying off the smallest balance first, then applying that payment amount to the next smallest balance
And, always pay more than the minimum. Build an Emergency Fund Life has a way of throwing financial curve balls. To pay for these unexpected expenses, it’s important to have an emergency fund. A good rule of thumb is to set aside at least 3 to 6 months of expenses in a savings account earmarked for emergencies. This will keep the money “out of site, out of mind” and help reduce your stress level when financial emergencies pop up. Know Your Credit Score Despite its importance, many people don’t know their credit score. Credit scores assist lenders in determining the interest rate you’ll be charged, so you’ll want to know yours and work on improving it. To get your free credit report, visit www.annualcreditreport.com. Reviewing your credit report may also help you catch signs of identity theft early. Start Saving for Retirement We’ve all heard it before, but it truly is essential to start saving for retirement as early as possible. This is because you want to take advantage of compounding – generating growth not only on the original investment, but also on the return you’ve already earned on the investment over time. Compounding allows the potential for your initial investment to grow exponentially. Also, make sure you contribute at least enough to your company retirement plan to get our employer’s match. Don’t pass up free money! Create a Budget Although it’s not always fun, following a budget ensures you will have enough money for the things most important to you. A budget helps you find money to fuel your dreams. Refer to the attached Create Cash Flow* to help you put your budget together. One of the most important things to remember is to pay yourself first! Always set aside money for your emergency fund and retirement before any discretionary expenses. * a chapter from my book Ultimate Women’s Financial Guide to Thrive after Divorce   All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
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Navigating the holidays post-divorce is a difficult enough task for adults, but it also bringssocks-1340553_1920 out stress and anxiety in children, whether small or big (adult). We tackled holiday survival post-divorce topics like “finding your new normal” and “creating emotional balance” here and here, now we will discuss guiding your children through the holidays. This is especially important if it is your first round of holidays since your separation or divorce. One of the most important aspects to remember is to be transparent about how the holidays will go. Set up a detailed schedule in your parenting plan early on with your ex. Having a plan in place and communicating those plans with your child(ren) will help ease some of their stress, even if it’s as simple as knowing that yes, both mom and dad will be at their holiday concert at school, or that mom will take the kids to see Santa. Whether your child is 2 or 20 it is important to maintain a holiday schedule and stick to it. Unfortunately it does require both parents to be willing to negotiate, and ultimately give up time, but developing a fair plan with your child’s best interest in mind will be better in the long run. Talk to your children about your traditions. Discuss with them what will remain the same, what traditions they will continue to celebrate and at who’s home, etc. Don’t be afraid to create new traditions. Many families will try to keep things as normal as possible, but that doesn’t mean that this isn’t a good time to start something new. Again, this holds true of children at any age, and talking about it early in the season will help them to know what to expect throughout the holiday season. Communication is key, even if it’s something that as an adult you wouldn’t think twice about, often times children do not have any idea what to expect for their first holidays post-divorce. For example, a young child has no concept of Santa knowing that they moved, or if Santa still comes if they are at dad’s house on Christmas and not at mom’s. Talk them through these scenarios. Establish realistic holiday expectations with your ex early on. How will you navigate gift giving with finances split? Especially on those big ticket items. Do gifts and toys get to travel from one house to the other? Etc. How will you avoid what becomes a “bidding war” of presents to “buy/show” your love? – This unfortunately happens often, and ultimately the child is negatively affected when years of this behavior occurs. The holidays are overwhelming for all of us – young and old, so don’t be afraid to ditch the lines at the mall, or the umpteenth extended family gathering, and trade for a quiet night at home with just you and the kids.
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piggy-bank-1429582_1920Sometimes your teenage children think they know everything. Do they know that if they saved the $6 they spend each day on a super antioxidant smoothie (or caramel macchiato), in 8 years they could buy a 4-door sedan in soul red or titanium flash (1)? Below are 3 lessons you should teach them about the long-term financial impact of decisions that they will soon be making for themselves. Lesson #1: Over time, compound interest can make a little bit of savings grow to a very big amount One of the regrets many of us has, is that we did not start saving soon enough. The idea of compound interest is something that your kids will understand by the time they are in middle school. There are numerous online calculators you can use to show them how deciding to save their money and forego that daily splurge can turn into better investments (like a new car). Lesson #2: College is a very expensive but financially important decision As your high schooler starts to contemplate where they want to go to college, don’t leave them out of the financing discussion. Even parents who expect to cover the entire cost of college need to make their child understand that it is a significant investment in their future, and not a nonstop party. Let them know that by completing college, they will likely earn $1 – $3 million more over their lifetime than their classmates who didn’t (2). Lesson #3: Credit cards are a tool and not a new source of money Credit card debt is rampant among people of all ages, but studies have shown that outstanding balances ramp up quickly after college. Before, during and after college, make sure your child understands that credit cards are not free money. Talk to them about using credit cards only to the extent that the balance can be paid off each month. Revisit Lesson #1 and show them how fast the balance on a 20% credit card can grow out of control. The best way to drive these lessons home is to set a good example. Demonstrate good use of credit by paying off your credit cards monthly. Develop a budget and then communicate how sticking to it serves larger financial goals. It’s very likely that you have made some big financial mistakes in your life. Wouldn’t it make sense to share what you have learned so they don’t make them too? (1) Assuming $6/day, saved for 8 years, earning 6% after fees, the total is $22,403. This exceeds the base MSRP of a 185 horsepower 2016 Mazda 6 4-door sedan with 6-speed manual transmission in Titanium Flash Mica ($21,330). The same model in Soul Red Metallic is $21,630. (2) The Economic Value of College Majors 2015, Georgetown University Center on Education and the Workforce.
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lemonade-standWhat are you teaching your children that will best prepare them for a successful adulthood? To be polite and say thank you? To believe in themselves? How about that if they save 15% of every check they ever earn, they will retire a millionaire (1). Preparing your child to handle the financial matters that they will face as adults doesn’t require a finance degree from Harvard. Below are some money lessons they can start at an early age. Lesson #1: Life isn’t one big shopping spree I think we have all experienced the grocery store tantrum when that 3-year-old just has to have the cereal with the cartoon character on the box. You can work with your preschoolers to understand that you go to the store for very specific items. Every trip to the store is not an opportunity for them to get a present. It is a lesson all ages could work on. Lesson #2: If you really want something, it is worth waiting for Teach your child about setting purchasing goals and saving for those goals. Have you given them a piggy bank yet? Every time they earn money or receive it as a gift, have them save at least 10% towards their goal. Lesson #3: It is important to spend wisely No one has an infinite amount of money so spending involves making choices. By the time your child is in elementary school, have them start to think about spending money on things they will still value in a couple of days. Here are a couple ways that you can help your child to develop money skills. #1 Give your child an allowance. You could use their age to determine their allowance amount. For example, my 7-year-old receives $7 a week. Make them understand that you take care of their needs and they use the allowance for their wants. An example of this would be when we went school shopping. I paid for my son’s school supplies that were on the teacher’s list. He really wanted a cool pencil box not on the list so he had to use his own money for this. It made him think about how badly he really wanted it. #2 Give them a birthday budget. Determine what you can afford for your child’s birthday present and party, then let your child determine how they want to spend it. Would they like to have the entire amount spent on a gift for themselves and forgo a party or would they like some combination of the two? Having a little skin in the game, really gets them thinking about spending wisely. During these early years, the overriding idea to teach your kids is that there is a difference between the things we want and the things we need. Giving them a little bit of responsibility at an early age will help them to understand this and set them up for a lifetime of healthy money habits. (1) Assuming that they work full-time for 40 years earning an after-tax salary of least $42,000 per year, and that their savings earn an average annual return of 6% after fees.
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cookingYou may find cooking a daunting enough task as it is, but cooking for just one can be downright grueling, and can often lead to unhealthy eating. If you find yourself undereating, forgetting to eat, going through the drive thru, or just grabbing something quick because you don’t have the energy to cook for just yourself, you are not alone. These quick bites are often unhealthy or what should have been a snack size portion of {insert your guilty pleasure here} has suddenly became a 2,000 calorie “dinner.” Even if it’s not just you for dinner, but you and young kids with small appetites, sometimes it still feels too cumbersome to make a “real meal.” We encourage you to be the healthiest you that you can be, so here are our best tips for cooking for one.
  1. Don’t shy away from buying in bulk. Your freezer is your friend, so whether you are buying in 1 pound packages or 10, freeze in manageable portions. Learn what manageable means to you – do you want leftovers to take to work for lunch the next day, or do you only want to eat that meal once?
  2. Speaking of buying in bulk, those bulk bins at the grocery store can save you money by only purchasing what you actually will use. Walk the bulk isle and learn what your store has to offer there.
  3. Prep before you freeze. Make fajitas for tonight, but prep enough to freeze in portions for later. Do so by cutting and seasoning your meats and veggies, so that all you need to do later is defrost and throw in a skillet.
  4. Love lasagna? Probably not enough to eat it for a week strait. Lasagna and casseroles can be cooked and then frozen into individual portions. Convenient and much healthier than store bought frozen dinners, which are full of preservatives.
  5. Make meals that turn into something else – no magic wand required! Pork roast in the crock pot for Sunday night can easily become Monday’s pulled pork sandwich, and Tuesday’s shredded pork tacos, without any extra prep or much thought.
  6. The deli and meat counters allow you the freedom to purchase in as small of quantities as you need. Purchase fresh deli meat when it’s on sale, have them portion out in quarter pound packages right there, freeze, and then you can pull out only what you need to last you a day or two.
  7. Learn what freezes well. For instance, eggs can be frozen individually in ice cube trays and then once frozen dump into a freezer bag or container. While some produce freezes beautifully, some not so much.
  8. If you don’t like to turn on your oven for “just one person” consider purchasing a toaster oven, which can do all the work of a oven and a toaster, and can often still be stored away, in a cabinet.
Hopefully these tips help you to make healthy eating a priority even when you are just cooking for yourself. A little prep work goes a long way, and can help save you from getting lost in a carton of ice cream come dinner time! If you have a good tip for cooking for one, please let us know in the comments below!
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tightropeBeing a single parent demands so much of a person’s time and energy that taking care of longer-term financial concerns often take a back seat. So many single parents face financial restrictions that make it seem they are constantly on a financial tightrope. Getting off that tightrope and onto solid financial ground should be a priority for every single parent. Finding solid financial ground starts with determining your financial goals and monthly cash flow. Determine your financial goals  The first step on the path to a more secure financial future is to determine your financial goals. Your financial goals should include short-term, medium-term and long-term goals. Short-term goals may be to reduce spending and not rely on credit cards to make it to the next paycheck. Medium-term goals could be paying off your credit card(s) and creating an emergency fund. Long-term goals may be saving for your children’s college expenses and retirement. Figure out your cash flow  All of your financial goals require one thing – saving money. To do so, you need to figure out how much you spend and then create a budget that incorporates saving. Tracking your spending can be pretty easy these days with online account aggregators like Mint.com. To better understand your spending habits when using credit cards, you may need to go old school and save the receipts to review your purchases.  This is particularly helpful if much of your shopping happens at Walmart, Target or Costco, where your shopping cart could include groceries, video games and clothes. One way or another, figure out how much of your spending is essential and how much is unnecessary spur of the moment buys. Create a budget that accurately matches your essential spending and replaces most of your unnecessary spending with savings. Be mindful of not only what you buy, but also how you buy it. Using high interest credit cards are an impediment to meeting your financial goals. Paying off high interest credit cards is a financial goal that improves the odds of meeting your other financial goals. Save the tax-free way  Tax-deferred investment accounts such as Investment Retirement Accounts (IRAs) for retirement and college-funding accounts, such as 529 accounts, are a good way to meet those long-term goals. These accounts often can be opened with a couple hundred dollars. Setting up automatic monthly contributions from your bank account to these accounts can be done for amounts as low as $25. Both types of accounts grow without being taxed until the money is withdrawn. For 529 accounts, there will be no taxes if the withdrawals are spent on qualifying college expenses. Figuring out your budget shouldn’t be a chore done after the kids are in bed. It should be a family project. Developing good financial habits that lead to meeting financial goals is an essential skill that all parents should share with their children.
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Determining who is best qualified to help you reach your financial goals, understanding what they can do for you, and getting clarity on how they get paid for their services may be a challenge if this is all new to you. Here are some useful tips to find the right financial professional to help guide you through your financial matters. Designations The finance industry excels at creating financial designations for every conceivable financial situation.  If you are looking for a financial planning generalist who can help you with most issues, look for someone with either a CFP®, ChFC® or CFA® designation. A Certified Financial Planner® (CFP®) is the dominant designation for financial planners. The Chartered Financial Consultant® (ChFC®) designation is similar to CFP®. A Chartered Financial Analyst® (CFA®) is an expert in investment management, but has also studied the basics of financial planning.  In addition to one of these designations, many financial advisors who work in the divorce area also have a CDFA™ designation (Certified Divorce Financial Analyst®). Background Check Once you find some candidates with the right credentials, do your homework and check out their website to see how much experience they have and if they indicate any specialty. You should also look into whether they have had any disciplinary issues with regulators, by performing a FINRA BrokerCheck® search. The Financial Industry Regulatory Authority (FINRA) has a file on every advisor working with a FINRA-registered brokerage firm at www.finra.org/Investors/ToolsCalculators/BrokerCheck Initial Meeting Questions Most financial planners will be happy to sit down with you for an initial meeting at no cost or obligation.  The initial meeting is your chance to learn more about the financial planner and their business, to explain your situation and learn what services the planner offers. The following are some essential questions to ask at the initial meeting. What experience do you have? The financial planner may have significant financial experience but it is the experience they have counseling individuals that really matters. What is your approach to financial planning? Ask what types of clients and financial situations the advisor typically works with.  For example, a planner that specializes on working with business owners may not be the best choice if you are newly divorced and in need of budgeting help. What services do you offer?  Some financial advisors may focus on helping you with your investment needs, where others will also provide comprehensive financial planning (i.e. retirement, education, estate, tax and budget planning). Many planners expect to manage your portfolio along with the other services that they offer.  Financial planners may also be good resources for and work closely with tax accountants and attorneys. Do you work alone or with a team? Financial planning is often done with a team approach where several specialists will assist the lead planner. When your financial planner is in meetings, it is good to know if there is someone else in the firm who can answer your questions or take care of basic requests in a timely manner. How much do you typically charge? How do I Pay for your services?  Financial planners may charge for their services in several ways. If they are only creating a plan for you, it may be a set project price or by the hour. If they are will be managing your investment portfolio on an on-going basis, they may earn a commission on the investments or a charge a fee based on the size of your portfolio. There are numerous questions that you should consider based on your own situation.  Remember that you are under no obligation in this meeting. If you intend to work with this planner over the long-term, it may take more than one meeting to determine if they are the right fit for you.  Whatever planner you decide to work with, make sure you know what services will be provided and how the planner will be compensated.  
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182478021-cashflow-gettyimagesOne of the challenges of divorce is separating income that used to be joint income, along with separating into two households versus one. This is a recipe for cash flow drain for most couples.  All of the sudden the same income(s) that supported one household must now support two households. I want to share an example of how cash flow solutions can be achieved through the collaborative divorce process.  Assume we have a couple struggling to make their cash flow positive which is often the case with divorce.  A substantial strain on their living expenses is secondary private school tuition for two more years for their child. This amounts to approximately $15,000 for tuition the first year and another $18,000 for the second year.  They are attempting to make these payments from existing income.  The strain of these payments coupled with divorce has become unbearable.  The parents are both determined to keep their child in this private school through the eighth grade. Additional assumptions include this couple having a small first mortgage on their home.  This mortgage requires a monthly payment of approximately $1600.  In our example, we would research refinance options including home equity loans.  After researching options an acceptable bank loan could provide them with the flexibility needed to lower the monthly cash flow shortage from over $1300 to approximately $220.  While this does not completely cover the entire cash flow shortage, it improves it significantly. The parents could draw from other savings if needed to make up this shortfall or look to further reduce some expenses.   An agreement could include that each parent would pay one-half of the cost of the second year private school tuition.  They both would have the flexibility to pay their share of the tuition from income sources, from savings, or some combination of the two. Structuring this part of their plan allows them to accomplish several goals.  One is to keep their child in the private school for the two additional years until graduation.  Secondly, it allows one spouse to stay in the home until the child enters the public school system and graduates from high school.  At that time, the spouse retaining residency in the home could either buy out the other spouse’s interest in the home or the home could be sold with sale proceeds being shared between the two spouses. Not all cash flow challenges can be so easily resolved.  What makes this situation work is everyone knowing what the goals are and everyone working together to help the couple find solutions that are in the best interest of the family and their children. Collaborative divorce, with the use of selected experts in their fields, can help divorcing couples navigate difficult issues with money, children, relationships, and emotions.  To learn more about collaborative divorce visit www.collaborativelaw.org and be sure to check out our blog site on a variety of topics at www.collaborativedivorceoptions.com.
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172399714Did you know that there is a National Financial Literacy Month?? Well, there is! The powers that be have selected April to be the Financial Literacy Month. Why April rather than July probably goes to the fact that so many people are acutely aware of their financial situation as they write out a check to the IRS. So, what is financial literacy and how does one become more financially literate? Financial literacy is about taking control of your finances by fully understanding the impact of your spending, saving and debt obligations on your financial well-being.  It is about making well-informed purchasing decisions and understanding the difference between wants and needs.  A financial literate individual understands the importance of saving for the long-term. They are committed to the budget that they created, which includes saving for specific large purchases, as well as longer-term financial goals such as a comfortable retirement. Financial literacy involves understanding the pros and cons of debt and being proactive about managing one’s debt obligations.  A financial literate person knows the importance of maintaining a good credit score and gets a copy of their free credit report annually at www.annualcreditreport.com.  Financial literacy is about recognizing when you have a problem managing your debt and getting assistance to help you manage the situation. Financial literacy is also about communicating openly with your significant other about financial matters. It is about teaching your children good financial habits such as saving for big purchases, starting a retirement account early and not getting in over one’s head in debt. So, now that you know what financial literacy is, go to www.financialliteracymonth.com to see what tools and information they have to help you be more financially literate.