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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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77380996-man-and-woman-building-a-stack-of-bills-gettyimagesYour divorce, regardless of process will not be free. While a free divorce is impossible you can self manage many of the costs of your divorce. In my work as a financial neutral working with couples and individuals going through divorce there are five key tips I have observed that can help clients reduce the financial and emotional costs of divorce. Do everything possible to minimize conflict with your spouse Divorce is not without conflict. Conflict is expensive. The greater the conflict between you and your spouse the more your divorce will cost in terms of money and in terms of emotional wear and tear. If you and your spouse can openly and respectfully discuss what you can agree to and seek help to work through the issues where you have differing opinions the financial and emotional costs can be reduced. You will save money and time when you put your heads together to resolve your differences instead of butting them against each other. Get organized and be prepared If possible, work together with your spouse to gather all financial records necessary for any divorce process. This includes but is not limited to statement copies for everything you own and everything you owe to someone, tax returns including W-2’s, paycheck stubs, bank accounts, credit card accounts, retirement accounts, other investment accounts, insurance information, mortgage and other loans, and information concerning employer provided benefits. Consider putting together a 3-ring binder or electronic file folders containing each of these items. Your divorce decree requires the itemization of every asset and liability. It is foolish, costly, and to your detriment to not be fully open and transparent with your spouse. Being organized, open and completely transparent will help reduce costs. Establish and communicate expectations Communicate clearly with the professionals you are working with while at the same time listening carefully to the professionals you do engage. Consider this a two-way dialogue and recognize that you probably do not know what you do not know. Your divorce professionals have the expertise and wisdom to guide you through this difficult time. The wise professionals want to do this in a timely and cost effective manner. Beware of the so-called professionals who promise to get you the best deal. Best deals come at a price both financially and emotionally. Identify your needs and interests, and those of your spouse Whenever possible discuss these with your spouse in an open and respectful manner recognizing each of you will have unique needs and interests. You and your spouse will also have shared needs and interests. Needs and interests are not positions. Needs and interests are the underlying reasons and factors why something may be so important to you or your spouse. A position is more like a demand or a must have without stating any particular reasons. If your spouse seems locked into a position, ask them why this particular issue is so important to them and listen carefully for the underlying reasons. If you can find a way to satisfy those reasons, you are on the road to resolution. Collaborate, compromise, and cooperate Ask yourself, if you make every decision a battlefield how do you think your spouse will respond. Drawing lines in the sand will only isolate you and make it harder to reach agreements not to mention cost a lot more money and take more time. Remember you got married together and you and your spouse will get divorced together one way or the other. You and your spouse get to choose how. Every divorce and family is unique and comes with its own set of circumstances. The complexity of the relational, financial, and legal issues of your divorce along with the ability of you and your spouse to follow these five tips will ultimately determine how long your divorce will take and how much it will cost. Choose your process and your professionals wisely. Check out this link to learn more and find out if a collaborative divorce is right for you. For more information and resources check out my website under the about us section at www.integrashieldfinancial.com.   There you will find a video featuring actual collaborative divorce process clients, a divorce knowledge kit, resources for those with children, and a link labeled Collaborative Divorce with Dignity and Respect.
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171328306-college-planning-gettyimagesParents with children who attend college get to take part in the annual ritual of filling out the Free Application for Student Aid (FAFSA). The FAFSA can be nearly as difficult as Calculus 101, but unlike calculus this math, can have real implications to your life and financial situation. If you are divorced with a child heading off to college, below are some things that you should know about FAFSA and student financial aid. The custodial parent is responsible for filling out FAFSA and it is only their financial and household situation that are reported on the FAFSA. This can have important implications for determining eligibility for aid and for calculating the Expected Family Contribution (EFC) to the student’s college expenses. Determination of the custodial parent follows the criteria below, in descending order of importance:
  1. The Custodial parent is considered the parent with whom the child lived the majority of the time over the 12 months prior to completion of the FAFSA (not the previous calendar year).
  2. If custody time is equally split, the parent providing more financial support over the past 12 months.
  3. The parent that provides more than half of support now and will continue to do so in the future.
  4. The above are the primary criteria, but other criteria used to substantiate the above include who has legal custody, claimed the student on their tax return or has the higher income.
Legally separated parents are considered to be divorced. Never married biological parents are treated in the same manner. Many private colleges do consider the non-custodial parent as a potential source of support, and require a supplemental financial aid form from the non-custodial parent. This affects the awarding of the school’s own aid, but not federal and state aid. The federal government does not consider the income and assets of the non-custodial parent in determining a student’s financial need. However, it does consider child support and other support received by the custodial parent. If the custodial parent has remarried, the income and assets of the stepparent are to be reported as well. Any prenuptial agreement that absolves the stepparent of responsibility for college funding is ignored by the federal government. Potential Impact of the Divorce Process on Student Aid Eligibility A divorce that is still in process or recently completed can have a serious impact on student aid eligibility. The following are common divorce maneuvers that raise the reported income of a custodial parent:
  • Investment and property liquidations
  • Retirement plan divisions that include a distribution to the parent
  • College expense payments required by the divorce decree will be included in the student’s income.
If you are in the process of getting divorced and have a child in college or heading there soon, you will want to consider how your divorce will affect your child’s financial aid eligibility. A maneuver in the divorce process to financially equalize both parties may backfire if it negatively impacts financial aid eligibility.
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130873646According to a Bowling Green State University study, the divorce rate for those over 50 more than doubled between 1990 and 2009.  The trend suggests that by 2030 there will be more than 800,000 divorces per year for the 50 plus age group.  This unprecedented rise in gray divorces is occurring while the divorce rate among younger couples is declining. gray divorce statsI will not be a year 2030 statistic.  My divorce was final in 2010 after a 32-year marriage, which most definitely puts me in that age 50 plus boomer group.  While the Bowling Green study and an endless amount of other research discusses some of the reasons and causes for this divorce demographic, I want to focus on how the issues are different for gray divorces and yet the same as those divorcing at much younger ages. In my experience, working with spouses as a financial neutral every divorce is unique to each family.  However, all divorces have some broad common foundational issues.  Every divorce, whether you are in your 50’s and above or younger, has at least some financial issues to be resolved.  Divorce financial issues involve allocating assets and liabilities to each spouse in an effort to be fair and equitable.  In addition if there are children under the age of 18 providing for the needs of the children is a consideration.  In certain situations, spousal maintenance may come into the play. What is different about financial issues in gray divorces is hypothetically; there are greater assets and fewer liabilities given their longer life and time in the workforce up to this point than their younger counterparts.  In my work as a financial neutral with gray divorcees, I can share with you this is not always the case.  Many times assets are limited and debts are significant.  A collaborative-trained financial neutral is well equipped to help spouses with these and other financial issues. There is less time for boomer spouses to recover from the financial loss of divorce.  Essentially assets and debts are allocated equally with some exceptions that have the effect of reducing the marital estate in half.  Sometimes mothers or fathers have stayed at home or otherwise sacrificed to some degree a working career to care for their children.  Now in their 50’s and above they will need to do what they can to work towards becoming self-supporting.  This is no small order, as we all know how difficult the job market can be for anyone let alone trying to re enter the workforce when you are gray and training and skills may need to be updated. When there are children under the age of 18 a parenting plan must be established.  Parents ideally come to agreements on how to co-parent their minor children.   This is not to imply that children older than 18 are not affected by divorce.  My children were all adults over the age of 21 when my divorce occurred and I can share the divorce had an impact on their lives as well as mine and my former spouse.  While child support financial obligations and parenting time schedules may not be a factor in gray divorces, those adult children need the support of both parents.  Gray divorcing clients would do well to consider the support their adult children need.  After all, there will still be birthdays, holidays, weddings, graduations, and yes-even grandchildren in the future.  Your children regardless of their age want to know they have two loving and caring parents who will always be there for them. With gray divorces, there are often decade’s long relationships with extended family members.  What will these relationships look like in the future?  Will the relationships continue to exist or somehow change a result of the divorce?  How will what happens to these relationships affect your adult children?  All of these and many more questions arise in gray divorces. Divorce, regardless of age, is never easy nor does it produce any winners in my opinion.  However, those who have made the decision to end their marriage would be wise to become knowledgeable of the collaborative divorce process. Collaborative Divorce is well suited to handle gray divorces.  This process when successfully completed keeps your divorce out of court and thus keeps it private.   More importantly, it keeps the outcome in your control.  You and your spouse are able to make decisions about your future not a judge with limited information and time.  Collaborative divorce is a process that involves dignity, respect, and acknowledges the contributions of each spouse to their marriage. If you know of anyone who has made the decision to divorce or is seriously considering divorce you would be doing them a favor by letting them know that collaborative divorce is an option and where they can go for more information.  To learn more about collaborative divorce visit www.collaborativelaw.org.
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A divorce can impact your ability to secure credit simply because you may no longer have the income you had when you were married. Here are five tips to maintain a good credit score and protect it for the future. 1. Know your credit score and what affects it. Your credit score report can be obtained for free (just one per year) through one of three credit bureaus: Equifax, Experian or TransUnion. Your score is determined by your payment history, outstanding balances, history of using credit, the type of credit used and how many inquiries into your credit happen throughout the year. Keep in mind that it’s good to have a credit card or other credit and to use it occasionally to maintain your access to future credit when needed for a car loan or mortgage, for example. If you had joint credit accounts with your spouse, your credit score may or may not need a little boost after the divorce based on the factors mentioned above. #2 Eliminate obligations where possible. A credit card or statement with your name on it does not make you a joint owner of the account. Unless the account was originally opened with an application signed by you, you may only be an authorized signer and you can request to have your name removed from the account immediately. If your former spouse is named on the account as an authorized signer, have his/her name removed to avoid any future charges. #3 Close joint accounts or freeze future charges. If there is no balance on a joint account, call the creditor and close the account, noting that this may temporarily affect your credit score. If you are in the process of applying for a loan, however, ask your lender if you should close joint accounts at that time or wait until you have the loan in place to avoid jeopardizing the loan. If there is a balance that cannot be paid off right away on a joint account, call the creditor and request to freeze the account from any future charges. You can pay off the balance over time without incurring additional debt. #4 Transfer balances to the responsible party’s individual card. For debt that you are not responsible for, request that your former spouse transfer the remaining balance to another credit card in just his/her name.  If they are unable to pay their share of the debt, payments still need to be made so that the account doesn’t default and your credit score isn’t affected. Make sure that you are receiving copies of all statements by requesting duplicate copies. #5 Pay your bills on time, no matter what a judge says. Divorce decrees do not override account agreements with your creditors. Both spouses are liable and responsible for joint debt regardless of who the judge ordered to pay the bill. If accounts default, then both spouses can be sued or have their wages garnished. One 30-day late payment can drop your score 25-75 points and it takes months to get those points back. If you have trouble maintaining current accounts during or after your divorce, consider debt counseling to better manage your finances and preserve your credit score for the future.