Navigating Divorce: Breaking Down the Three Stages for a Calm and Steady Approach

A financial adviser who has gone through divorce suggests approaching the process in three stages: the decision, the negotiation, and the finalization. To start, the decision stage involves understanding household finances, including all expenses, not just the big ones. This will help make the adjustment to being single and managing finances alone.

Divorce is a significant life event that can have profound financial implications. A financial advisor who has navigated this process suggests approaching it in three stages: the decision, the negotiation, and the finalization. Understanding the financial aspects of divorce can help individuals make informed decisions and minimize the impact on their financial well-being.

The Decision Stage

The initial step involves understanding the household finances, including all expenses, not just the big ones. This comprehensive assessment helps in making the adjustment to being single and managing finances alone. It is crucial to evaluate all financial obligations, such as mortgage payments, utility bills, and insurance premiums. Additionally, it is essential to review savings, investments, and retirement accounts to understand the current financial status and future prospects.

The Negotiation Stage

During the negotiation phase, it is important to work with a financial advisor or a Certified Divorce Financial Analyst (CDFA®) to ensure that financial decisions are well-informed and aligned with long-term goals. This stage involves dividing assets such as bank accounts, retirement plans, real estate, and business interests. It is crucial to consider the tax implications and liquidity of these assets to make an equitable division.

Moreover, the negotiation phase also includes planning for future expenses, such as child support and alimony. A financial advisor can help model various scenarios to understand the financial impact of these obligations and ensure that they are manageable within the new financial reality.

The Finalization Stage

Once the legal process ends, it is time to focus on rebuilding with intention. This stage involves reassessing retirement goals and timelines, adjusting investment strategies based on new income and risk tolerance, and updating estate documents and beneficiaries. A financial advisor can help create a financial plan that reflects the new lifestyle and long-term vision, ensuring that the individual is well-positioned to achieve their financial goals.

Conclusion

Navigating divorce involves understanding household finances, dividing assets equitably, and planning for future expenses. Working with a financial advisor throughout the process can provide clarity and peace of mind, helping individuals make informed decisions and protect what matters most.

References

[1] Janney Montgomery Scott LLC. "Marriage, Divorce, and Financial Planning." Retrieved from https://advisor.janney.com/stoufferfreemanwealthadvisors/news-and-commentary/research-and-insights/all-sites-marriage-divorce-and-financial-planning/.

[2] NerdWallet. "How to Save Money." Retrieved from https://www.nerdwallet.com/article/finance/how-to-save-money.