Creating a financial plan after divorce is one action item I strongly encourage people to do. It’s a plan for supporting themselves and their children and it’s a plan because it’s more than just a budget. It’s about setting financial goals, taking stock of assets and debts, figuring out a budget, and knowing your income. And because divorce often changes the financial picture dramatically, a financial plan needs several variations: a now, a right after the divorce and a five year time frame.
Marjorie had been a stay-at-home mom and at the time of her separation had started her own business as an Exit Strategist helping single mompreneurs build their business to a profitable position. During her separation she continued building the life she wanted. At the divorce trial the judge ruled not only on child custody but also on the division of the financial assets. The judge awarded Marjorie spousal support, part of her ex’s retirement assets, no liability for the marital debts and child support. I asked Marjorie if this would change the plan she’d developed. Here’s Marjorie:
I didn’t really ask for spousal support because it didn’t make a bit of difference to me, I was still going to get my life on track, with or without any spousal support. My attorney asked for it and to me, it’s a little extra money. Not much, and I’ve already decided that money is going to go into a savings account. When the two years are up, that total amount, I’m going to do something nice with it. I’m not even going to be spending it now. The child support, that’s going to be used to take care of me and my daughter to enjoy ourselves, when she’s with me.
I’m still moving forward as I did before any of this happened, with building my business and my dream. I’ve got to make a life for myself and not everybody is going to be able to have spousal support or have child support, so no matter what, I’ve still got to move forward and do what I’ve got to do.
My spousal support isn’t anything huge, that’s why I said I would and save it for now, because I can make more than that in my own business. As far as half the retirement, my ex wanted to keep it in his 401(k) fund, and then I would get to draw on my half of it when he draws on his half of it, and I said, “No.” I said I wanted to be in control of my money.
I do have a good friend who’s a financial planner, and she’s going to help me set up something to put my money in. I’m having to draw a little bit out of it but for the most part, I’m setting up my own retirement fund.
All of this goes back to what I’m trying to teach single mothers: when you become financially independent in your life, first of all you don’t quickly get married for the wrong reason, and second of all, you can go into a marriage with that part of your life being whole. I think a part of that independence is knowing that you can invest your money, and how to put your money to good use.
To be honest, I’ve been able to take from this experience so much more knowledge that I am able to share now with my group, to say, “These are the steps that you need to start taking, this is what you need to start doing.” In a way, all of this that’s happened has been a gift. It hasn’t been pretty, it hasn’t been fun in the least, but it has been a gift, and I’ve seen how it’s been a gift. I’ve already developed a workshop and I’m writing the last chapter of my book because everything’s done now, it has an ending. I see a lot of good fruit coming out of this in the end, so in some ways I thank him, but at the same time, I wouldn’t have wanted to go through it.
The Divorce Coach Says
Marjorie has her feet firmly on the ground here – while both spousal support and child support are legal obligations, the reality is that payments are frequently late, not paid in full or even not paid at all. If you can build your life without being dependent on this money, you’ll still be able to manage when payments are missed. That may not be realistic to start with but if you know you’ll only be receiving spousal support for two years, then you have two years to increase your income or reduce your expenses so won’t be short when the spousal support period is over.
I also agree with Marjorie about removing her share of the retirement assets from her ex’s 401(k). Leaving the money in her ex’s fund, leaves her exposed to future risks over which she has no control … what if he changes employer and moves the money somewhere else? What if he takes a loan against the fund? What if the company he works for goes into bankruptcy and that somehow impacts the payout from the fund? Would he consult with her on where her funds were invested? What happens to the growth in the intervening years? Too many what-ifs.
Not only does it make sense to take direct control over the monies, it’s also a cleaner psychological break. Given the level of conflict in Marjorie’s divorce, the fewer connections Marjorie has to maintain with her ex, the better it’s going to be.
What do you think? Are there circumstances where you would wait for a payout?
This is the last segment in Marjorie’s update and again, I’d like to thank her for bravely sharing her story.
Photo credit: 401k