Wealth Weekly: Coping with Life After Divorce
AUGUSTA, Ga. (WRDW/WAGT) - Dakota: We are joined again by Private Wealth Advisor Will Rogers to talk about the impact of Divorce on your finances and how to set up for a secure future afterwards.
Will, you shared with me in advance that you’ve been through a divorce when you had kids in the house and took some fairly uncommon steps to prepare for a good future. Tell us about that.
Will: My kid’s Mom and I met with a counselor – not to save the marriage, but rather for help in how to be good parents going forward. With her help we came up with several agreements, the biggest of which was that the kids stayed in the family home, and their Mother or I would move in and out as custody changed each week or two. Years later my daughter told me that that was one of the best things we ever did as parents, putting the kids interest so far ahead of our own.
Dakota: Wow, that is different, but wasn’t that expensive? You were going from maintaining one household to now three homes.
Will: It cost more than one, but it definitely cost less than two equivalent homes. Normally when couples divorce one person stays in the family home and the other person purchases an equivalent home so the kids will each have their bedrooms at both Mom’s house and Dad’s. I renovated a 1,200 square foot, 2 bedroom cabin up at Clark’s Hill, where I continue to live full time for about $40,000. The kids Mom rented for several years, and then as we agreed, had full ownership of the family home as the kids grew up. For anyone thinking this sounds appealing I recommend renting for a year or so
Dakota. How did that end up working?
Will: It made parenting way easier. There wasn’t any, “I forgot that at the other parent’s house” and it’s a lot easier for one adult to gather their stuff and move than it is to pack up everything for 3 kids. Much more importantly during a time of incredible change the kids had the stability of one home, one bedroom, one routine. I’m not saying that weren’t some tough things – especially because we were sharing space it was easy to be reminded of the reasons we got divorced. But again, it made parenting SO much easier.
Dakota. Now I’m not sure all of our viewers going through a separation or divorce will be able to do that, and that was really driven by having young children. What is something almost anyone going through a divorce should keep in mind?
Will: Like so many of our recent shows – having a good, updated spending plan adjusted to your new patterns. If you are looking for new housing it might be on a lot less income, so be careful to not put yourself into a spot. Even better, avoid making any major purchases until you feel very comfortable with your new budget.
Dakota. Other than your unique housing idea, what should parents keep in mind for their children?
Will: Future financial milestones. Milestones may include paying for private grade school, college tuition or a wedding. If you’d like to help your children with such expenses, consider these questions: Will you receive financial support from your former spouse? Do you expect your kids to contribute? As each event approaches, be up front with your kids about what you can afford so they can set realistic expectations.
Dakota. How will your insurance needs change?
Will: When married, your spouse IS your primary form of insurance in a lot of scenarios. If you’re disabled they can provide income for the household, if you’re sick they can care for you – now you’re on your own. All forms of insurance should be reviewed and considered. Make sure you understand the specific benefits that you and your former spouse are entitled to, as well as the life, health and disability insurance policies that you both own through your employers. If you have children, whose health insurance plan will be used to cover them? Work quickly to establish an insurance plan to avoid financial risk of being uninsured
Dakota. Somewhat related to insurance is beneficiary designations – do those need updating?
Will: I’ve seen really tough circumstances, one of which was with a widow whose husband had never changed one of his beneficiary designations after he remarried. That’s why it’s so important to know a beneficiary designation is a binding contract that is not automatically changed in the event of divorce. So after a divorce, you’ll want to change the beneficiary designations on any life insurance policies, retirement accounts, annuities, and bank or brokerage accounts you may have in place. This is also a good time to make a will or update your existing one to reflect your new status. Make sure that your former spouse isn’t still named as a personal representative, successor trustee, beneficiary, or holder of a power of attorney in any of your estate planning documents.
Dakota. Where should you direct your savings?
Will: No matter how close – or far – you are to retirement, make it a priority to update your retirement goals and continue building your nest egg. While retirement saving can feel overwhelming as you balance competing financial priorities, having a plan can help you feel more in control.
Dakota. What about future dreams and plans?
Will: Once you have a handle on your new day-to-day finances and retirement, allow yourself to dream and plan for other milestones that are important to you. While you were married, you may have set certain financial goals with your spouse. Now that you are on your own, these goals may have changed. Do you wish to travel abroad? Go back to school? Open a small business? Whatever your dreams, determine the cost of each one so you know how much you’ll need to save. Save what you can each month, and keep in mind that even small amounts will add up over time. If you’re tempted to spend the money elsewhere, consider establishing a separate savings account.
Dakota. How about getting help with all of this?
Will: Professional guidance from an attorney, tax professional, estate planner and financial advisor can ease the burden of managing your finances. It’s hard to start over, but you can do it. And having someone not in the middle of the emotions can be very helpful – you might want to “buy yourself young” with travel, sports car, clothes, etc. While there’s an OK amount of self-indulgence, a good advisor can keep you from going overboard.
Dakota. Good advice - For more information, check out Will’s website at www.WRogers.info
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