Category: Money

Legal Separation/Divorce/Money

Practical, Specific Divorce Information

This recent article offers practical, specific information about important financial considerations in divorce.  Don’t let the “late-life divorce” angle deter you.  The factors addressed in the article affect more divorcing couples than just those over the age of 55.

  • Tip 1:  “Right-size” your expectations.  In short, there are more costs with a divorce than before and rarely more resources.  The piece quotes a wealth strategist named Chris Chen, who says it costs an average of 25% more for the couple to run two separate households.  I’ve not seen this precise figure before, however it sounds like a reasonable point of reckoning.  A realistic financial plan for post-divorce life will take such cost increases into account.
  • Tip 2:  Work longer, aka delay retirement.  Increasing your life-time income will help offset the financial impact of a divorce.
  • Tip 3:  Be open to selling the family home.  The advice here is not to keep the family home if it is a heavier financial burden than the party can afford.  However, the likely “best option” of selling the family home may not be a simple choice from a financial perspective, given Seattle’s real estate and rental costs.
  • Tip 4:  Choose assets that will provide income, such as a pension.
  • Tip 5:  If there’s spousal support (alimony), guarantee that income stream with life insurance or disability insurance.  Opting for insurance coverage helps ensure that the party receiving support will receive the resources to which they’re entitled, with a minimum of legal and administrative hassle.
  • Tip 6:  Be aware of all assets of the marriage.  For most folks, divorce is the biggest financial transaction in their lives.  It’s so important to fully understand the assets of the marriage and each party.  In Washington, the law of separate and community property can color divorce outcomes; unless you’re a family law attorney, you likely haven’t analyzed your estate along those lines.
  • Tip 7:  Be mindful of how you will ensure that your health care needs are covered, and also determine what that will cost.
  • Tip 8:  Minimize the debt that you’ll divide in the divorce.  If you need to carry debt forward, have each party “take” their separate portion of the debt and put it into a new account in that person’s name alone.  This will reduce future headaches that can arise if a creditor tries to collect on a portion of community debt that should be the responsibility of the other spouse.
Money/Self-employed

Year in Review

A useful practice I’ve found for this time of year is to review what’s happened since January 1, and to think ahead to what I’d like to see for the next year.  I’m not sure when my own practice of this originated, however I recommend it enthusiastically.

With financial coaching clients, we we start by looking over their spending record for the year.  Clients will share what they’ve noticed, what went as expected, and what went differently than they’d expected or hoped.  We also talk about clients’ most significant accomplishments around money, what they’re proudest of.  And, for balance, we also talk about clients’ most significant disappointments.  These observations are all raw material for building a strong plan for the coming year.

When we look ahead to the coming year, we consider what one thing will be most effective in helping a client meet her/his financial goals and what one thing is most important to stop doing.  We talk about the financial goals that the client would like to achieve and what behaviors they want to shift.  And we talk about what internal, self-limiting beliefs a client might want to address.

This approach could work for many things in our lives, of course.  Money is a useful lens for me because so many choices tie into money.  Happy reviewing, and best wishes for your ideal 2016!

 

Money

On Saving

Based on financial projections in a current case, I’ve recently been wowed by the power of saving money.  Radical, cutting-edge stuff, right?  Truly, though, I’m understanding why financial tips on saving abound.  It’s invigorated my own efforts to spend less money–or to be smarter about how I’m spending my money–and it’s also prompted me to be more intentional about pushing money into savings (strategy: “out of sight, out of mind”).

In my financial coaching work, I often work with clients who are trying to figure out where their money is going and/or how they can pay down credit card debt.  With that work, focusing on just “saving money” is often too simplistic an approach.  There are many, many factors that go into our financial habits and really effecting change requires being attentive to them.  Also, just barking at folks to “save money” doesn’t work if that advice backfires and triggers feelings of deprivation or fear, both of which can lead to more spending.  Lastly, some folks really need to make more money, such that saving is not going to get them where they want to be financially.

But, I digress.  This post is really about how impressed I have been with what strategic saving can do.  If you can make lifestyle changes such that you can “sneak” money out of your budget to grow, the results really can be astounding.  Time is the magic, tricky ingredient that you’ll need on your side; please let me know if you’ve discovered how to generate more of it.

An advantage of saving is that you can start with what you have; in other words, you don’t have to “do” anything like get a job (or a raise), find a financial planner, etc.  If it will plausibly and objectively meet your needs, you can just opt for the smaller size, the store brand, to use a coupon, borrow, rent, buy used, buy a part and do-it-yourself, trade, or make.  If you do, you can keep a bit more of your money and it saves the trouble having to earn that money (and more, because of Federal tax rates of 10-40% plus any state income tax rates).  To paraphrase Benjamin Franklin, a penny saved is actually more than penny earned.

Based on the research I write about here, a precursor to effectively implementing a saving strategy may be to think of your dear self in the future.  Doing that will connect your short-term actions with your long-term goals.  Me?  I try to tell myself that my future self will have costs that I can’t even anticipate yet–some fun, some simply necessary–and although I can’t control them, I can control what I pick now.  It works at times, and even that helps keep more money for me/us.

Save on!

Divorce/Estate/Financial Planning/Legal Separation/Divorce/Marriage/Money

What’s Yours is Yours

One of the things that I find (incredibly) nerdily interesting about my work is the concept of the character of property.  In Washington, most property is either separate property or community property.  (I’ll spare you the “quasi-community” property and the legal nuances that arise when parties move to/from a community property state from another state.)

Legally, there’s a presumption that what you acquired before marriage (either as an asset or debt) is your separate property or obligation.  When you marry, or in certain cohabitation circumstances, the legal presumption changes and the law begins to think of folks as a financial team.  Property that’s acquired is assumed to be community property; debt that’s acquired is presumed to be community debt; and the name that something is in is not the “last word” as to the character of the property.  These ideas, “Community Property 101”, if you will are key concepts for my pre-nuptial, divorce, and estate planning clients, as the character of property determines where the financial focus is in a divorce and what you have control to give away in a will.

A line I’ll often throw out is this:  “What’s mine is yours” is the opposite of the concept of separate property.  If it’s “mine”–my separate property–then it’s likely going to stay mine unless there’s a clear indication that I wanted to change that.  While “what’s mine is yours” may be a romantic notion, it’s not how the law sees it.

To that end, I thought that this piece on CNN Money was both clear and helpful.  The piece is primarily a response to the question of “if I marry my boyfriend [will] his student loan debt [become] mine too”?  The short answer is “No”.  Debt acquired before marriage?  That’s separate debt.  The longer answer is very thoughtful, though, as there will be impacts on the marital community from the existence of the debt.  In other words, while the debt is a separate debt, they’ll share its impact.

Money

Children and Money

This post on BBC.com is an interesting little piece on children and money.  Not only is it good food for thought for parents, it’s also a good reminder to reflect on what we all learned as children from our family and caretakers.  I think that the advice of German author Barbara Kettl-Romer has for parents is good advice for all adults:  understand [your] relationship to money.

Estate/Financial Planning/Legal Separation/Divorce/Money

Change, and Willpower

My latest “read”–an audio book, actually–has been “Willpower” by Roy F. Baumeister.  Published in 2011, it’s a book about the science behind controlling yourself.

I’ve taken two of Baumeister’s lessons to heart, and passed them on to clients.  Namely, (1) we humans have a limited supply of willpower, and (2) we draw on the same supply for everything we do.  This was interesting but not great news for me, as it sounds like it’s going to be a tall order to get keep myself on track for marathon training, to increase the frequency of my financial tracking (see this post for why), and to try to cut the coffee shop scones from my diet.  It was also an “aha!” moment, as it explained why the self-improvement symphonies I’d composed in college never worked, and why a single-minded focus on getting to law school graduation did work.

One of the things that I like about the work that I do is that nearly all of my clients are changing some aspect of their lives.  Pre-nuptial clients are getting married.  Other clients are divorcing.  Financial coaching clients are sick of having debt and/or not knowing where their money goes.  For all of these clients, though, this book suggests that there are limitations around the willpower we have for change, in addition to the more apparent limitations of time and resources.

So, I invite you to be conscious of how you are using your willpower.  If you truly want to see change in one area of your life, delay making changes in other areas.

Money

Eating Our Money

Or, how the teacher once again becomes the student…

When I talk with financial coaching clients–and especially potential clients–I try to stress that the work is a process.  To paraphrase Jack Kornfield, achieving financial health is not a one-time event where you “get dispensed” and then move on.  It’s on-going work, which I was recently reminded of in my personal life.

It was nearly four years ago that I convinced my husband that we should work with Mikelann Valterra to take charge of our personal finances.  (As I describe here, I’d had fantastic results with my business finances!)  My husband was game and so we started tracking our spending using the Money Minder (now online).  Through the tracking process, we learned that we spend a lot of money on food.  A lot.  A LOT.  Really, we eat our money.  Even though we saw that we were spending a lot of money on food, we decided we were ok with that:  We like fancy foods, we like eating out, and it worked in the context of our income and other expenses.

Fast forward a few years, and now our team of two has become a family of three.  Having a child has changed, um–how to say this?–EVERYTHING.  Are we buying more food?  Yes.  Are we buying more expensive food, as well?  Yes.  Do we spend more when we eat out, because Junior needs dinner too?  Yes.  Are we spending more on everything else?  Yes.  Has our income gone up accordingly?  I wish.  Do we have hours of free time to track our spending?  Hardly.  Is this what many clients face?  Oh heck yes.

I decided to blog on this because I think I’ve just had the experience that I think many clients have.  I shifted from being in a money fog (which is to say, being unaware of the details of our spending) to being shocked and not a little terrified at what I saw.  Yikes!  No wonder it felt like money was disappearing–it was!  

Why did I think we should have more money than we did?  Because I was clueless about our new level of spending in some major areas, specifically food and childcare.  (I’m not really addressing the childcare piece, as the disconnect between what I thought we’d spend and what we are spending was due to an inexplicably low estimate on my part.)  In the “trees” of grocery store price labels and restaurant entree charges, I’d lost a sense of the “forest” into which those numbers aggregated.  Without real-time tracking and conscientious spending, we took our past pattern of eating our money and expanded it just like we’ve expanded our family.  The painful lesson?  There are consequences to the financial choices you make.

The good news about financial coach training/expedience that I have is that I know how to get us back on course.  For the money we’ve already spent, we need to adjust our spending plan for the year to take into account that we’ll be spending more on food than we’d planned.  That’s not great news, however it’s reality.  Going forward, we need to make more of an effort to manage our food expenditures.  This may not be fun, however it’s something under our control.  We’ll also need to regularly and frequently track of our expenses, to verify that we’re on track.

Will we keep “eating our money”?  Yes.  Will we do it at the level that we had been?  I bet not, because that number does not make sense for the income and expenses that we have now.

Divorce/Estate/Financial Planning/Legal Separation/Divorce/Money

Decide What Your Stuff is Worth

This excerpt on Slate.com offers a “Minimalist” perspective on some of the hidden costs of our belongings.  I’m not siding one way or the other in the stuff debate, rather I’m recognizing that–as is true for everything–being mindful of our acquisitions is critical.

As kids, we learn that it costs money to buy something.  It’s as we get older that we recognize it also costs time, energy, and money to maintain it.  Having a car is great, until you have to wash it.  Having a backyard is great, until you have to weed it.  Having a house is great, until you have to replace the water heater.  As Joshua Fields Millburn writes:  “No matter how organized we are, we must continue to care for the stuff we organize, sorting and cleaning our meticulously structured belongings.”

In my work, I see the financial challenges that folks face to get and maintain their stuff.  I also see the choices they have to make during tough times such as divorce or death.  Like many professionals who work with divorcing couples, I have seen what happens when anger, fear, and disappointment converge and a normal object’s importance far surpasses its market value.  The emotions of the divorce distort the client’s sense of worth so that it seems fighting over that object is a good use of their time, energy, and money.  I suspect that if these clients’ wiser selves could talk to them, they’d advise saving money and skipping the battle.

Will contests happen when heirs are unhappy with how a relation’s estate passed.  To some extent, estate planning in Washington is simplified by the fact that a testator (person making a will) can create their own, separate, written instructions as to the disposition of tangible personal property.  Nevertheless, at death, your choices about what things felt deserved your time, energy, and money will directly impact the person or persons who administer your estate.  

For myself, I’d say that I’m a “sufficient-ist”.  I need stuff; stuff helps comfort and entertain.  And I want my stuff to be worth the time, energy, and money that it takes to maintain it.  

 

Money

Let’s Talk About Money With Our Kids

My last post was about the how talking about money can help dissipate a sense of financial shame.

Talking about money is important for our kids’ sake, too.  While my little guy just recently turned one–and the biggest financial risk he could take would be eating loose change–that won’t always be the case.  Here is a compilation of suggestions on how increase financial literacy for kids.  I particularly like these suggestions:

  • Set a good example in terms of your financial effort and attitude;
  • Have open and honest (and age-appropriate) conversations about money;
  • Advocate for financial education.

Let me know what resonates with you!

 

Money

Let’s Talk About Money

Hello, Dear Reader,

First, let’s be honest:  It’s been an embarrassing amount of time since I last posted.  Really embarrasing.  Truly.  Embarrassing.  And I’m sorry about that.  The issue is the finite nature of time, and the fact that I’ve not found a magic spell that will allow me to use the same set of hours for childcare, billable work, and blogging.

Now, let’s dive in at the deep end of the pool.  The topic of this post–and, I’d predict, many to come–is talking about money.

My plea is that we talk thoughtfully about money.  Or, at least, that we commit to making the attempt even if it feels a bit awkward.  We need this, as the mainstream discourse about money addresses either how to save a dollar or how to use all those dollars you’ve saved to buy a house.  The cultural conversation about money touches too rarely on how to work with money on a human level.  

Unfortunately, shame is a very common component of folks’ relationship with money.  We consider our own circumstances, and compare them to others’, and we feel that we’ve fallen short.  This feeling of shame is unpleasant, certainly.  Worse, it has a stickiness, feeding a vicious cycle where we feel bad about what we have to show for our efforts, keeping us from talking about our circumstances or asking for help, and making it all that much harder to get where we’re hoping to go.

I found some great pieces from late last year that offer complementary approaches for starting to dissolve shame around money, including one that profiles financial therapist Bari Tessler Linden and offers practical steps for helping to heal a money shame.  If you feel you’re dealing with money shame, I encourage you to read up on the subject and find someone you trust to talk about money.  (If you’re wondering, my answer to this question of whether you should hire a money coach is almost always yes!)