Guide to Financially Surviving a Divorce

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Guide to Financially Surviving a Divorce

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Divorce is a difficult enough process on an emotional level without having to worry about the financial costs. Nationally, the average divorce takes nearly eleven months and costs around $15,500, including $12,800 in attorney’s fees at an average of $250.00 per hour. Divorces that go to trial cost even more, averaging $19,600, while those that settle privately pay an average of $14,500.

One of the most basic and important requirements for divorce court is a financial affidavit that provides an accurate picture of your income, expenses, assets, and liabilities. Compiling this document can be sometimes frightening and always at least a little bit overwhelming, if you’re doing it alone.
In this article, we will look at how to financially survive a divorce by doing what is legally required of you while still protecting yourself and your assets.

 
Dividing Assets & Liabilities

Most couples going through a divorce decide on splitting their assets and liabilities on their own or with a mediator rather than leaving it up to a judge. In fact, some experts estimate that only five percent of cases go to court. If you and your former spouse end up in front of a judge, don’t worry. It is important to look beyond the present and keep the big picture in mind to avoid making any emotional decisions.

There are two different sets of rules when it comes to splitting assets and liabilities, depending on the state you live in:

  • Community Property – This is the rule here in Washington, as well as Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Wisconsin, and Puerto Rico. It means that assets and liabilities are classified as either community property or separate property. Community property is equally divided between spouses, while each spouse keeps their own separate property.
  • Equitable Distribution – All other states are equitable distribution states, which means that assets and liabilities accrued during marriage are divided as equitably as the court sees fit. It’s important to note that equitable isn’t the same thing as equal. For example, in some states, a judge might order one spouse to dip into what other states would consider separate property to make the settlement fair to both spouses.

Community property includes everything that was accumulated during the marriage. Separate property includes everything prior to the marriage along with gifts, inheritances, personal injury awards, pension proceeds (vested before the marriage), or similar types of property given to one of the spouses.

The house is often the most difficult decision. If there are young children involved, the house often goes to the parent that will spend the most time with the kids. If no children are involved, the house goes to the spouse that owns the house as separate property. If the house is community property, the situation becomes a bit trickier and a court may decide for the couple during divorce proceedings or as part of a temporary order.

If you’re a business owner, you’ll have a whole other set of concerns to address (assuming you don’t already have some sort of prenuptial agreement in place).
In addition, you’ll need to sort out distribution of any retirement plans, 401(k), and/or pension plans. Often, courts will implement a QDRO (Qualified Domestic Relations Order) that recognizes the joint interest in such plans and splits them accordingly.

The long and short of it is this: when you end up in divorce court, you and your spouse lose a lot of decision-making power. It is in your best interest to settle privately.
This may require you to give up some items that you feel are rightfully yours. Try to look at the big picture and think about whether these things will make much of a difference to you in five years. If not, then let them go.

One other option to consider is a practice called “collaborative divorce.” This one really only works if you and your former spouse are parting on relatively amicable terms and can decide on the terms of your divorce amongst yourselves without taking it to court. It’s less expensive and lower stress for everyone involved. Check out the International Association of Collaborative Professionals for more information.

 

Determining Income & Expenses

Fewer than one-third of Americans prepare a detailed household budget each month that tracks their income and expenses. Maybe you never felt a need for one before. You will likely wish you had a budget during your divorce proceedings, because the financial affidavit requires a detailed look at your income and expenses each year.

Before you go into court, take the time to build out a spreadsheet of your income and expenses. Do not rely on your spouse to present an accurate picture of your financial situation. Even if you do not think he or she will be dishonest, it’s still important to present your side of the story in all regards.

This can be a particularly difficult process if your spouse handled the lion’s share of financial matters. Get login information for all your accounts, request statements from your bank, meet with your financial advisor, and take any other steps to build as accurate of a picture as possible.

Click here to download our retirement planning guide.

Many fixed costs are easy to find, such as your mortgage, real estate taxes, insurance, cable bill, internet bill, car payment, gym membership, and cell phone bill, which makes them a perfect starting point. You can usually find these numbers on account statements that are mailed or emailed or by looking at your bank statement for the past month.

The next step is calculating weekly costs, such as groceries, child care, gas, parking, lawn care, dry cleaning, entertainment, and allowances. While it may be tempting to just look at last month’s bill, you should take an average throughout the year to get a more accurate picture. After all, you may have gone on vacation last month and not paid for groceries or child care, which would give you an unrealistically low estimate for these categories.

The final step is to take a look at your uneven and/or random costs that occur throughout a given year, such as utilities, car repair, medical costs, holiday gifts, and vet bills. It’s also important to include spending that doesn’t necessarily occur every year, such as vacations that you might take every other year or major medical procedures. Average out these expenses to come up with a monthly cost, as if you were saving for them on a regular basis.

 
Household Inventories

Most people are aware of the need to calculate their assets, liabilities, income, and expenses, but it’s easy to forget special or sentimental items in the process. During a divorce, each spouse should create a separate checklist of household items that are important to them.

The easiest way to create this checklist is to create categories for different items, such as artwork, furniture, books, and clothing. When adding items to these categories, it’s important to assign a monetary value to each of them. Courts usually assign flea market values, even when items are new, so if you have documentation of value, it’s important to include it.

Finally, be sure to capture video or still images of everything in the order that they appear in the checklist. If your list seems too long to document, at least photograph the items with the greatest value to you. It’s important that the court understands what item is being considered when it assigns ownership rights to one spouse or the other.

 
What to Ask a Lawyer

Divorce attorneys constitute the bulk of most divorce expenses. At a cost of between $150 and $350 per hour, you’ll want to come to meetings prepared to ask important questions and get the answers you need quickly.
You’ll want to discuss a few issues up front with your lawyer:

  • Fee Structure – Will they bill you for each hour spent on the case, including the time spent answering questions? Or is it a fixed fee? Since divorces can take months to finalize, you need to be prepared to cover the costs.
  • Divorce Procedure – What is the divorce procedure in your state? Most attorneys can provide an estimate of the timeline. If you work full-time or have a busy life with children, this knowledge can help prepare you for what lies ahead.
  • Alimony Issues – Different states have different rules when it comes to seeking alimony from the other spouse. For example, some alimony issues depend on the length of the marriage or discrepancy in earnings between spouses. Ask your attorney about these laws to provide an idea of your liability or benefit.
  • Child Custody – This is the most important, and potentially most difficult, matter in any divorce with children. If you can’t privately agree on who will retain custody, it’s important to understand the factors that are important to state judges from the beginning. Your attorney should provide some idea of the odds of custody and any challenges. Keep your children out of the proceedings as much as possible and try not to speak negatively about your former spouse around them. While you are understandably upset, that other person is still their other parent.
  • Asset Splitting – Lawyers should be able to tell you how states handle splitting assets, which can help you prepare ahead of time.

It’s also important to shop around for the right divorce attorney. Choose three potential attorneys and meet with each of them before making your decision. If the cost is out of your range or if there are any red flags, move on to the next attorney and find one that is right for you.

The Bottom Line

Divorce is a stressful and expensive time, but there’s a high cost to making any mistakes during the process. By following these tips, you can help ensure that you financially survive a divorce.

A financial advisor can also help during these times by providing objective advice to help minimize costs and divide assets in ways that make sense.
Contact us today for a free consultation to learn more about how we can help.

Dale Terwedo, CFP, ChFC, CLU, BFA

Dale Terwedo, CFP, ChFC, CLU, BFA

Certified Financial Planner and Founder

When I founded my original practice in 1983 and then TFS Advisors in 2008, I had one goal – to bring confidence and clarity to my clients’ financial lives. As I worked with clients for over 38 years, it became apparent that the pre-retirement transition was often the most challenging both financially and emotionally. With so many moving parts, clients felt overwhelmed and fearful that they’d miss a key detail that could jeopardize the retirement lifestyle they’d been working toward.

We will provide you useful and timely information you can use to be #financiallyfearless

Becoming Free From The Fear Of Failure

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Becoming Free From The Fear Of Failure

An Interview With Savio P. Clemente
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Do First. Think Later. Learn By Doing. When I was a kid; I wanted to learn how to ride a bike. But I am stubborn and didn’t want anyone to help me. Regardless, my brother instructed me to just straddle the bike at the top of a hill, lift my feet up, and then coast down the hill…all I had to do was balance. Little did I know if I started at the top of a hill, I would be going very fast by the time I got to the bottom. And I didn’t know how to brake.

The Fear of Failure is one of the most common restraints that holds people back from pursuing great ideas. Imagine if we could become totally free from the fear of failure. Imagine what we could then manifest and create. In this interview series, we are talking to leaders who can share stories and insights from their experience about “Becoming Free From the Fear of Failure.” As a part of this series, I had the distinct pleasure of interviewing Karen Koenig.

Karen Koenig is a speaker on the topics of money types and money mindset. She is the author of “Woman on Top: How to Win in a Woman’s Way”. She is the founder of KK Financial Solutions and is a seasoned Financial Advisor/Planner who helps individuals, business owners and divorcees understand how to create a financial future that is right for them and their businesses.

Thank you so much for joining us! Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’?

I was originally born and raised in the Midwest, but in 2012 I moved to the Pacific Northwest and currently live on a little island North and West of Seattle, called Whidbey Island. Through my careers, I have accumulated over 30 years’ experience in male-dominated fields. I spent 26 years in the military, 6 years in aerospace and then changed careers entirely and went into financial services in 2015. I love being an entrepreneur, where I can work with individuals, small businesses, and divorced people to help them plan and grow their financial future.

Can you share with us the most interesting story from your career? Can you tell us what lessons or ‘take aways’ you learned from that?

When I was in Officer Candidate School (OCS) I was the guidon for our flight. Meaning I took care of our flight’s flag and carried it during our marching sessions. On one occasion our flight got in trouble, and we had to do push-ups as punishment. I had no idea at the time what to do with the guidon (flag), or how I was supposed to do push-ups while holding it, and I was downright scared to do the wrong thing. So, without thinking, I proceeded to do a one-handed push up, while still holding the guidon in the upright position. My Drill Instructor was impressed to say the least but scolded me later and stated I needed to find a better way. Later I found out I was supposed to wait for the flight to do their pushups, then hand the guidon to the person behind me, then do a two-armed pushup just like everyone else.

What I learned from this experience was to prepare for certain situations that might happen while in the process of doing a particular task, then store the knowledge in my databank for later use. Knowing at some point I would l have to do push-ups while carrying the guidon, I should have watched what another guidon did with their flag when their flight had to do push-ups. Had I prepared ahead of time and observed how to do this task correctly, I could have taken the fear out of the situation and applied the correct procedure from the start.

You are a successful leader. Which three-character traits do you think were most instrumental to your success? Can you please share a story or example for each?

I believe the three character traits that were most instrumental to my success, were the core values I learned in the military. Integrity first, service before self and excellence in all we do. Integrity is the willingness to do what is right even when no one is watching. It’s the moral compass or the inner voice. Service before self is the new assignment or new job which we take that isn’t in the ideal location, or the need to retrain to do something else even if you are happy with where you are at. Excellence in all we do is a mindset of giving your best, striving to continually improve yourself, and expecting the same from others.

Ok, thank you for all that. Now let’s shift to the main focus of this interview. We would like to explore and flesh out the concept of becoming free from failure. Let’s zoom in a bit. From your experience, why exactly are people so afraid of failure? Why is failure so frightening to us?

I believe people are afraid of failure because of a couple of reasons. They either don’t know exactly what to do at every step of the journey or they hit a roadblock and quit. People get so caught up in trying to figure out how or the right way to do something, they get into ‘analysis paralysis’, and never start. Or, when they hit a roadblock, instead of moving past the issue, they just stop because it’s the easiest thing to do. Failure is so frightening to us because there might be the perceived negative judgement of us by others, or a sense of shame or disappointment. In essence, we don’t want to let ourselves or others down.

What are the downsides of being afraid of failure? How can it limit people?

Failure causes stress and stress causes the release of cortisol, which can lead to many issues to include limiting people from succeeding at goals, on how to be productive, or it may even impair your relationships. Therefore, the downside of being afraid of failure is never accomplishing what you set out to do in the first place. The fear grips you to the point you do not act on things which could change your business and/or life.

In contrast, can you help articulate a few ways how becoming free from the fear of failure can help improve our lives?

Becoming free from failure can improve your life in many ways. Success releases dopamine, which helps regulate unconditioned fear in the brain. In essence dopamine can help you accomplish a goal. When you feel good this then helps in productivity. The more you succeed, the more you want to accomplish. And, last, when you feel good, and are productive, naturally your relationships become better.

We would love to hear your story about your experience dealing with failure. Would you be able to share a story about that with us?

Of course. I experienced true failure in recent years when I was studying to become a financial advisor. The Series 7 test was very long and was an ardent task to study for. The test itself was 135 questions and they allot 3 hours and 45 minutes to complete the test. After studying for months, working with an advisor, and taking many practice quizzes, I sat for the test and failed it the first time by 5 points. Once you fail, you must wait 30 days to retake the Series 7 again. After 30 days, I sat for the test again and failed the second time by 1 point. Then, after another 30- day wait, I was allowed to sit for the test again and I passed!

How did you rebound and recover after that? What did you learn from this whole episode? What advice would you give to others based on that story?

I recovered slowly. I was embarrassed the first time I failed, but I knew I could take the test again, so I did. But after failing the test a second time, I was not only embarrassed, but I felt I was a complete failure and I wanted to quit. Quit my goal of becoming a financial advisor.

My advice to others is reach out for help! I finally reached out to another advisor and told them I wanted to quit, but they encouraged me to try another time. I am glad I listened. What did I learn? If I had quit after the second time I failed, I wouldn’t be the successful financial advisor I am today. Never quit because it could be the day before you become successful!

Fantastic. Here is the main question of our interview. In your opinion, what are 5 steps that everyone can take to become free from the fear of failure”? Please share a story or an example for each.

I have 5 steps that are principles in my book:

  1. Do First. Think Later. Learn by Doing.
  2. Perfection is not Progress
  3. Find the Truth and ask for help
  4. A Target only you can hit
  5. There is Power in Failure

Do First. Think Later. Learn By Doing. When I was a kid; I wanted to learn how to ride a bike. But I am stubborn and didn’t want anyone to help me. Regardless, my brother instructed me to just straddle the bike at the top of a hill, lift my feet up, and then coast down the hill…all I had to do was balance. Little did I know if I started at the top of a hill, I would be going very fast by the time I got to the bottom. And I didn’t know how to brake. By the way, I was riding a bike which had a braking system controlled by reversing the pedals…of which my feet were NOT on because I had lifted them to let the pedals spin. Half-way down the hill, I was screaming at my brother, “How do I stop?!” And low and behold, I hit a lifted piece of sidewalk and wiped out. I ended up cracking my head on the cement and getting a big goose egg, but you know what? I learned how to ride a bike! I did it first, thought about consequences later, and then I learned how to do it better.

Perfection is not Progress. Perfection is defined as everything must be 100% accurate or in place. Perfection paralysis is when everything must be 100% to move forward, where progress is going from 50 to 60%. If you are improving that is progress. The primary focus is starting somewhere and improving on where you are. Because when people think they need to be perfect, they often don’t get started at all.

Find the truth and ask for help. When I was married, I wasn’t happy towards the end. We had gone to counseling three times over a period of three years. Things would get better for about six months; then we would go back to the same behaviors that had gotten our relationship in trouble. I was avoiding the reality that divorce was the solution, but we had two small children. Long story short, I reached out to my pastor and asked what I should do. I asked for help, and he guided me to the solution that I should not stay in an unhappy marriage just for the kids. He made me realize I was teaching my children it was okay to always be unhappy. I found the truth in my situation, and I asked for help.

A Target only you can hit. My parents taught me at a young age to set goals. They were the ‘set it and you will achieve it’ type people. My father was an EMT in the Air Force and then went to school, after I was born, to be an engineer. My mother went to college to be a nurse, through the ROTC program, and then served four years in the Air Force to pay back her college tuition. My goals were to be the first sibling in my family to go to college, to join the Air Force and eventually get commissioned as an officer. I defined my goals by looking at what I wanted to do in life, then I looked at my family and how those goals might affect them, and then I set out to achieve them. I wrote the goal down, I mapped out the preliminary steps and then I envisioned the goal daily, keeping only the end in mind without getting caught up in the “how’s.” I now do a 5-year vision board to help my process of goal setting.

There is Power in Failure. In the process of writing my book, “Woman on Top: How to Win in a Woman’s Way” I met a huge stumbling block along the way. The publisher and I talked through the steps, and I followed his successful process for publication. I was going along great, figuring out my content; coming up with examples and fleshing out what I wanted to say, and just when I was close to finishing, I got stopped by compliance. I had received permission to write my book but was never told I had to produce the manuscript before I started to promote it. I paid for a URL and had a website set up but was never told the website had to be approved. Therefore, I had to shut it down right when I was getting started. I let this one event define how and when I was to move forward. The publisher I was using had a proven process, and I was not able to follow it, so I thought I had to quit everything, including writing the book! Even though I had a failure in the process, I was able to meet with my publisher and get back on track using a modified process to fit my needs, and still get my book done.

The famous Greek philosopher Aristotle once said, “It is possible to fail in many ways…while to succeed is possible only in one way.” Based on your experience, have you found this quote to be true? What do you think Aristotle really meant?

I certainly have found that quote to be true. I think Aristotle meant it takes multiple failures to meet our personal definition of success. In my case, as you have seen, I have failed several times at my goals, but like in all the examples, I succeeded in then end, in one way or another.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

I would inspire a movement to change what is currently being taught in the school systems. I believe it would be more beneficial to teach young people practical skills on how to be successful in life. For example, how to open a bank account, how to file their taxes, how to buy a house, how to apply for a job, when/how to invest, etc.

We are blessed that some very prominent leaders read this column. Is there a person in the world, or in the US, with whom you would love to have a private breakfast or lunch, and why? He or she might just see this, especially if we tag them 🙂

I would love to sit and chat with Jamie Kern Lima, author of “Believe It” and founder of IT cosmetics. I admire her tenacity, her grit, and her authenticity. She was met with many failures in her rise to the top, yet look at where she is at now…what a blessing and a gift to see her success in a highly competitive industry.

 

About The Interviewer: Savio P. Clemente coaches cancer survivors to overcome the confusion and gain the clarity needed to get busy living in mind, body, and spirit. He inspires health and wellness seekers to find meaning in the “why” and to cultivate resilience in their mindset. Savio is a Board Certified wellness coach (NBC-HWC, ACC), stage 3 cancer survivor, podcaster, writer, and founder of The Human Resolve LLC.

Karen Koenig

Karen Koenig

Founder and Ower

As CEO and Founder of KK Financial Solutions, I use the principles from the book to help business owners, entrepreneurs, and divorcees like me, with their money mindset. I also help them to understand and implement a financial strategy that is right for their family and business, and to grow their money using other principles beyond the traditional venues of 401k, IRA and ROTH.

We will provide you useful and timely information you can use to be #financiallyfearless

Helping Loved Ones Through the Last Years

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Helping Loved Ones Through the Last Years

Even a financial professional can be caught unprepared when life doesn’t go as planned. Here are five things I learned with my own parents … and that I wish I had known before it all started.
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When my parents downsized to a duplex, we thought we had their final years all figured out — finances, housing and medical care. Unfortunately, things rarely work out the way you plan them.

Within a few years of moving from our family home, my father started showing early signs of Alzheimer’s. Complicating the situation, my mother had increasing mobility issues and relied entirely on a scooter and a walker to get around. Initially, we had high hopes that my father would be able to take care of her in a quasi-assisted living environment. His diagnosis and diminishing independence changed all of that.

 

Looking back, you see the signs. For years he loved driving to the local forest preserve to take long walks. Suddenly he would find himself lost and not be able to find where he parked. With my mother unable to stop him from doing something he loved and unable to chase after him, strangers would call her to tell her he had been found and would help him back to his car. And there were many other worrisome things happening, like him leaving the stove on, leaving the house and forgetting why, and becoming increasingly frustrated by the growing limitations of the disease.

 

Like many families in this situation, we never thought Alzheimer’s would happen to us. But when it did, we all knew that the future was going to be very different from what we had imagined. We felt a frightening sense of urgency to do something, anything, to make all of us better able to handle this unplanned future.

 

Leaving Home Is  Hard

My mother, while of sound mind and unrelenting determination, began falling frequently because of her multiple sclerosis. The 911 responders were becoming familiar visitors to their home, which only added to  our worry and sense of urgency to find a safer, more permanent solution. We knew  we had to begin looking  for a place for  them as soon as possible. But how do you find the right  place?  Everywhere seemed too expensive, too fancy or  too far away.

And once you move them to a new town, you need a new system of doctors, as well as transportation, drugstores and a new social support system. Concerns cascaded: How do you find the right caregivers and trust that they have your parents’ best interests at heart? How will you get them to the doctor once  they can no longer drive?

Concerns mounted, and there were few professionals or organizations to help back then. You could search the Internet, but the options were limited.

We relied on referrals from the family doctor, friends and co-workers. Then we searched the old-fashioned way: countless phone calls and interviews of staff members of the few assisted living centers in the area. We also tapped into the local senior citizens council. Finally, we found a place in a nearby suburb that seemed like the best alternative to their duplex. But it required my father to lose his home, garden and the companionship of his beloved cat.

The move completely changed his life — literally from one day to the next. That’s when his Alzheimer’s symptoms significantly worsened. He went from early-stage to mid-stage within a little over three months.  We were losing him fast, and it was terrifying. Before, we believed that nursing home care was at least five years away. Suddenly, it was the right here, right now.

Care Is Costly – Financially and Emotionally

Statistics say that three years is all you need in long-term care. My father was in full-time nursing care for a good solid six years. We spent almost $7,000 a month for both of my parents, $4,000 more than we had carefully planned for. I was familiar with long-term care planning, but I was not prepared for this.

Expect a Role Reversal

I worried about my mother. She did a fantastic job caring for my father, but I knew she was neglecting herself. Once he passed away, focusing on her became easier. But switching the roles of parent and child is never simple.

Parents don’t want to be a burden on their kids. As they age they give up control of almost everything: their finances, their health and their choices. That’s hard on everyone, but especially parents who are most comfortable being the ones depended upon, and not dependent upon others.

As their child, you take it on because you love them and it’s what you want to do. I felt like, “I can’t begin to pay you back for what you did for me, so let me do this for you.”

That doesn’t mean they’re going to be OK with it.

Everything becomes a power struggle. My mother often said, “Remember, I am the mother.” And even though I knew she wasn’t in a position to be the mother, I had to bite my tongue. You have to learn how to communicate a completely different way. You can’t bark orders, but you can’t let things slide either, such as neglecting hygiene or not taking medication.

Repeatedly, I had to remind myself that I had to be the grown-up, and not the child, as much as I wanted to sometimes cry, stomp my feet and have it my way. Communicating with my mother was a balancing act of restraint and persistence.

 

Have a Conversation before the Crisis Hits

Planning for old age is a conversation no one wants to have, but take it from me, it’s something you need to do. Nobody wants to talk about when they’re going to die, but it’s not an “if.” Legal and financial considerations abound. Make a list.

Everyone should have at the very least a will, a health care power of attorney and a power of attorney for property. If your parents don’t have those, that’s a great way to start the conversation. Once this hurdle is crossed, ask to be introduced to the attorneys and be included in conversations.

Also, talk about catastrophic illness when you’re planning. No parent wants their kids burdened with picking up the pieces in the midst of a health crisis with no preparation whatsoever.

All roads lead eventually to financial preparedness. Talk about what will happen if the funds run out and care is still needed. Typically, when retired parents run out of money, they end up on Medicaid. If the kids have the ability, they pool their money to get their parents a nicer room at a Medicaid facility. They help pay for entertainment, clothes, maybe a short trip. Several of these facilities won’t kick them out once they are on Medicaid, but some will. It’s scary, because people are living longer as medical costs escalate, and not having enough money to be admitted to a facility really limits your options.

 

Coming to Peace – It Takes Time

Some advice I would have given myself on the outset of this journey is to pick the battles. Let your  parent have their choice as much as possible. They have a truth in their head — it doesn’t have to match yours. And they do need a little control.

Many times, battles between adult children and aging  parents  come down to their own frustration and vulnerability. It has nothing to do with the child. But it is difficult to embrace that truth when you are in the middle of it.

Second, use your resources. There are a lot of them out there (so many more than when I was going through the process). Look to such resources as the AARP website, local senior citizens councils, as well as large social service organizations. And other people you know who are in the same boat qualify as an excellent resource, too. You don’t have to create a formal support system. Just talk about it, and find someone with whom you can relate. When you’re in it, it sometimes feels like it will go on forever, and it’s nice to know you’re not alone.

Finally, find peace in just making things a little better. We are so uncomfortable with aging and death in this country — it does us all a disservice. I could never do enough to make my mother’s life the way I wanted it to be. I wasn’t that powerful. I had to let go and make peace with the fact that I was doing everything I could to make the end better. That’s hard to do. You can’t fully prepare yourself for it. You just have to pay attention and appreciate the moments that do remain to spend time together. And when the end comes, you enter a new chapter of adulthood. You tidy up your parents’ earthly goods, you gather up your memories, and you move forward.

 

Note:  Investment advisory services provided through TC Wealth Partners LLC, an investment adviser registered with the U.S. Securities and Exchange Commission. Trust services and retirement plan services are provided by the Trust Company of Illinois, a trust company chartered by the Illinois Department of Financial and Professional Regulation. Past performance is not indicative of future results. The content of this article is for guidance and information purposes only and is not intended to be construed as advice. Information provided is not intended to provide investment, tax or legal advice.
Nancy Bell, CFP®, CDFA™

Nancy Bell, CFP®, CDFA™

Wealth Adviser

I guide my clients and their families through the host of life transitions: Pre and Post Retirement, loss of spouse/partner through death or divorce, change in Employment and Liquidity events. I also specialize in creating investment strategies that reflect personal values and financial goals using ESG metrics. I will invest the time needed to gain a full understanding of your unique situation, set priorities and provide insights to help make those important financial decisions. My mission is to create a clear and manageable path for my clients to attain and maintain financial security.

We will provide you useful and timely information you can use to be #financiallyfearless

Don’t let your past mistakes get in the way

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Don’t let your past mistakes get in the way

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No one is born with money management skills

The only financial education I got when I was a teenager was one day in class the teacher showed us how to fill out a check. She didn’t discuss how to balance the checkbook or anything else about money. Even then I thought that was so odd. I couldn’t figure out why she was only teaching us how to spend money. 

My mother was a bookkeeper but never taught me how to manage my accounts. Actually, she never said anything about money until one day when I was already an adult and had a business. I had received a check from a client that bounced which created a ripple effect and caused all kinds of problems. I called my mother and yelled at her. Why hadn’t she taught me anything about accounting or bookkeeping?  She came over the next day and taught me how to balance my check book and told me to not spend money I received until the check had cleared the bank.  Helpful information but still not all that I needed to know. 

By the time we’re adults, we are expected to be able to manage our money effectively; however, few of us are taught how. Therefore, many people experience the usual emotions that occur when they don’t know how to do something well.

These may include: 

  • Frustration
  • Guilt
  • Envy
  • Anger
  • Shame
  • Disappointment

Like driving a car or playing an instrument, the skill of managing money must be learned – and it’s never too late to start! If you put fear to the side, doing so can lead to immediate benefits. You won’t necessarily make more money if you have a budget and track your spending, but you will be able to use the money you do have to make your life more joyous now and in the future. Learning how much your life really costs might just motivate you to look for ways to increase your income so you have more money for the things you desire.  It’s likely that you will also feel more deserving of making more money now that you are a skilled money manager. 

If you manage your finances responsibly you will have peace of mind and know how to:

  • Get the most from the money you have
  • Live without debt
  • Save for the extras that make life enjoyable
  • Avoid constant money anxiety
  • Save for unexpected expenses and life events

The foundation of sound money management is a budget. However, for many people, the word “budget” evokes feelings of fear, frustration and shame. Your budget is simply your plan for how you will use your money. It is based on choices you make and priorities that you identify. You are in control and can allocate your money to be used for the things you care about and give your life meaning.

Creating a spending plan, or budget, is a step–by–step process. Once complete, your budget is a tool you can use to plan for future possibilities.

If setting up a budget is something you have been putting off or are afraid to tackle please think about hiring a money coach to help you. Taking control of your finances really can change your life.

Sheryl  Kosovski

Sheryl Kosovski

Money and Business Coach

I think of myself more as a self-love or self-worth coach than as a money coach. I help my clients see their value, so they come to believe they are worthy of more. Sure, I also teach them to make spending plans and how to get out of debt and save. More importantly, I help them to see that by taking care of their money they can better take care of themselves and the people they love.

We will provide you useful and timely information you can use to be #financiallyfearless

5 Ways Women Can Support Their Financial Health Long-Term

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5 Ways Women Can Support Their Financial Health Long-Term

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Women’s contributions to society are boundless. But even as they continue to trailblaze the labor market and find greater financial power, one critical wildcard remains—longevity.

On average,

      • Women earn less than men—about 82 cents to the dollar, according to NBC News.
      • They are more likely to take breaks from their career for child support and/or caregiving, resulting in an over 1 million dollar gap in lifetime earnings, according to Merrill Women and Money report.
      • Women are also expected to live longer than men, according to the CDC.

Looking at these facts, something doesn’t add up.

The impacts of COVID-19 on schools, childcare, and work, have caused even further setbacks for women in the workplace. Overall, women have lost a record 5.4 million jobs throughout the pandemic—1 million more than men.

It’s essential that women find long-term financial stability and wellness. But how can you plan for longevity when it seems like the odds are stacked against you?

Our TFS team would love to walk with you on this journey and help you build a plan completely tailored to your unique situation. Today, we’re going to explore avenues for women to consider longevity in their long-term financial plan.

How Does A Longer Life Expectancy Impact A Woman’s Financial Plan?

According to the CDC, the average life expectancy for women is 80.5—about 5.5 years longer than men! This data suggests that it’s rather likely that a woman will outlive her spouse. It’s also likely that women will be the primary caregivers for their spouses.

That’s roughly five extra years of living expenses, healthcare, lifestyle needs, taxes, and more, all of which could be supported by one income instead of two. Social Security benefits alone will be reduced by at least ⅓ and possibly up to ½. This presents several important considerations and potential lifestyle changes.

The impact on your lifestyle rests on several moving pieces:

      • Your investments (401k, IRA, brokerage, any inherited accounts, etc.
      • Insurance policies
      • Healthcare needs
      • Social Security
      • Pension income
      • Retirement goals
      • Spending habits
      • Estate plan

Longevity predictions should be baked into your and your spouse’s retirement plan from the start. Doing so will help each of you prepare to take care of the surviving spouse. Planning early can help mitigate financial stress and uncertainty in the future. Let’s dive into the top ways that women can prioritize their financial health throughout retirement.

1. Consider Your Health—Physical and Fiscal

Physical health is an essential component of longevity planning. Everyone’s health situation is different and should be accounted for on a case-by-case basis. Some elements that could impact your health long-term are:

      • Current health and underlying conditions
      • Family health history
      • Lifestyle habits

Staying active in retirement is an excellent way to promote your health long-term. Even so, it’s expected that 70% of people 65 or older will require long-term care at some point, and in Washington, such care doesn’t come cheap.

Most recent data revealed that the average cost of nursing homes in WA runs at $266 per day—a solid $38 higher than the national average. With the average stay in a nursing home running 28 months, you’re looking at over $210,000 in nursing home expenses alone. That’s almost $30,000 more than the average 401(k) balance at 70—$182,100.

All that, and an AARP study also found women comprised over 70% of residents in nursing homes, making long-term care a critical consideration for women.

Those numbers aren’t counting any other long-term care requirements like home caregivers before or after the nursing home stay and other medical expenses like surgery, ongoing treatments, or regular Medicare payments.

Healthcare costs and funding can easily absorb a significant amount of your nest egg, making it necessary to properly plan for. All of these numbers lead to one question:

How can you pay for it?

Tips To Prepare for Long-term Care Costs

      • Long-term care can be funded from multiple sources.
      • Long-term care insurance
      • Personal investments
      • Medicaid

There is another option for Washington residents. The state recently passed an initiative to create a publicly operated long-term care insurance program. How will the state pay for it? They’ll issue a new tax. Starting January 1, 2022, W-2 employees will be subject to a 0.58% payroll tax on all earned income. The tricky part about this tax is that there is no income cap, so all earnings for W-2 employees will be subject to this new tax.

Is there a silver lining? If you have your own long-term care insurance policy, you can opt-out of the tax and the program.

Keep in mind that everyone’s situation will be different and that these are simply general ideas to consider as you look at how long-term care could fit into your longevity plan.

Long-term care insurance can be a good way to bring flexibility and options to your care plan. We like to view it as a supplemental tool to your other retirement resources. It may not cover the full cost of your care, but it could go a long way to preserving your nest egg, future inheritances, and other retirement assets to support your desired lifestyle.

But long-term care insurance can be costly and isn’t right for everyone. Generally, our rule of thumb is that if the premiums consume more than 7% of your income, it’s too expensive.

For those with robust retirement resources, they may be able to divert some funds from their nest egg to pay for the cost of care.

While Medicare doesn’t cover the costs of long-term care, Medicaid can kick in should you qualify. In many cases, qualifying for Medicaid means dipping into nearly all remaining assets and as such might not be an option you want to rely on.

Keep in mind that states have “spousal protection” provisions that allow for a healthy spouse to retain more assets. It’s designed to help people keep enough for living expenses while also allowing their spouse to receive long-term care via Medicaid.

2. Create a Social Security Plan

Building a strategic Social Security plan with your spouse is vital for longevity planning. Social Security benefits are based on lifetime earnings and indexed for your highest 35 working years.

What if you don’t have 35 years in the workforce? The Social Security Administration inputs a “0” in your formula, which can have drastic impacts on your full benefit amount. This can affect women who may have taken time away from work to raise their children or care for a parent or relative.

For married couples, Social Security planning is critical. Our team can help you build a plan that maximizes the surviving spouse’s benefits. Survivor benefits are among the more complex elements of Social Security. Let’s take a look at the basics.

A widow or widower qualifies for survivor benefits if,
They are at least 60 years old
Have been married for more than 9 months before the time of death

There are several exceptions including if you have a disability or if you’re caring for a minor child—which allows you to apply earlier.

Survivors are eligible for 100% of their late spouse’s benefit should they claim at full retirement age. Claiming before full retirement age results in a reduced benefit. If you were receiving spousal benefits, the SSA will likely automatically switch to the survivor benefit once the death was reported.

It’s important to note that you won’t receive benefits both off of your work record and survivor benefits—the SSA will pay the higher of the two amounts.

While implications are complex and vary greatly from couple to couple, below are some general guidelines to consider.

Maximize the higher earner’s benefit.

Consider a restricted application—file for the lower benefit first, then switch to the higher at 70. While this type of application was removed from spousal benefits, it’s still a viable option for survivor benefits.
We know how critical Social Security planning is for longevity. Moving from two benefit checks to one can cause a dramatic drop in benefits—likely more than many people anticipate. It will reduce your benefit anywhere from 35-50%, and the discrepancy is worse for couples with similar earnings. Our team would like to help you make a plan for Social Security benefits throughout retirement.

3. Prioritize Your Investments

Women are strong investors. They tend to be more values and goals-based, save more, maintain realistic expectations, seek counsel when needed, and take a long-term view of their portfolio’s performance, according to a Fidelity study.

While women are steady investors, they tend to face several financial obstacles when it comes to retirement planning. A Merrill Lynch benefits report found that women enter retirement with an average of $70,000 less than men. This could present a significant challenge as they are also positioned to outlive men by about five years.

Women need to prioritize their investments to and through retirement. A strong investment plan tailored to your goals, values, risk tolerance, and more can put you in a better position to support your lifestyle longer.

Women also tend to be more risk-averse than their male counterparts. While risk is inherently personal, a certain amount of risk is necessary to sustain a 30+ year nest egg.

We’d be remiss to talk about longevity and not bring up inflation. Your portfolio needs to consider the impacts of inflation on your total nest egg. $1 today certainly won’t equal $1 10 years from now, making it critical that your portfolio is positioned to withstand the effects of inflation.

It’s all about building intentional portfolios and creating a withdrawal strategy meant to stand the test of time.

4. Account for Changes In Spending and Goals

According to Fidelity, 60% of women are concerned about outliving their retirement savings. This is a common fear among many pre-retirees. How can women prepare their finances to last well into the future?

Let’s take a look at a few ideas.

      • Avoid spontaneous overspending early in retirement
      • Know spending goals and habits
      • Create a strong cash flow plan

Consider lifestyle changes should you outlive a spouse—downsizing, moving to a retirement home or closer to family, etc.
Preserving your nest egg is all about maximizing the resources available to you. We’d love to help you build a plan that works for you.

5. Work With A Team You Trust

Planning for a long life is a beautiful, exciting, and sometimes challenging experience. It’s critical to know that you don’t have to undergo these life transitions alone. Our team at TFS is positioned to guide you through life changes and help bring confidence and clarity to your money.

Is your retirement plan built to support your life? Let’s talk about it together.

Dale Terwedo, CLU®, BFA™, CFP®, ChFC®, CPRC

Dale Terwedo, CLU®, BFA™, CFP®, ChFC®, CPRC

Certified Financial Planner and Founder, TFS Advisors

You may be wondering how your lifestyle will change as you move through retirement, and how to create a plan that reflects the lifestyle you want during this new chapter in your life. Things may feel unstable as you gear up for retirement, and we’re here to help provide clarity and understanding to your situation. Our goal is to empower you to be self-sufficient in your role as the “CFO” of your household, while also freeing you up to spend your time and energy to enhance, protect, and focus on your family, community, and interests.

We will provide you useful and timely information you can use to be #financiallyfearless

Boost Your Financial Confidence

Purse Strings Approved Professional

Blog Series

Boost Your Financial Confidence

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When Sir Francis Bacon wrote “knowledge is power” he could have been talking about women going through divorce. Especially if he had said “financial knowledge.”

Too often women wish they had taken the time before divorce negotiations became a reality to get a better sense of their financial picture, including expenses, debt and investments. That said, it’s never too late to take control of your financial situation. When you understand your finances, you can face divorce with confidence and more accurately plan for the future.

All women — whether happily married, contemplating divorce or newly single — can benefit from the following financial to-do list.

1. Determine How Much Money Is Coming In
This total will include your income, your spouse’s income, any investment income such as dividends, potential bonuses, tax refunds, monetary gifts, etc. Getting a total sum will help you determine how much could be yours to work with after the split.

2. Calculate Your Household Expenses
How much money is going toward housing, utilities, credit card bills, college funds, retirement savings and other expenses? Your household expenses will change post-divorce, but it’s important to understand how your joint money is being spent now to get a sense of what you’ll spend in the future.

3. Reconnect with Professionals
Make sure you have a relationship with your family’s accountant, estate attorney, insurance broker, and any other professionals you’ve employed jointly with your spouse. If divorce doeshappen, you may need information/advice from them. Your conversations with us(your financial firm) will be an important touchstone as you weigh the division of financial assets.

4. Check Your Credit Reports
A divorce often means splitting assets such as your home, retirement accounts and investments. In the process, you may find that you will need to refinance an existing mortgage, structure a new mortgage, apply for your own credit card, get a new auto loan, etc. Determining you have a solid credit rating ahead of timewill help ensure you get the best rates and give you enough time to correct any errors.

5. Check Your Health Insurance
If you’re on your spouse’s employer-sponsored health insurance policy, call the benefits department or insurance carrier to determine how long your coverage will continue so you can make any change in a timely, cost-efficient way.

    A solid understanding of your current financial picture can give you the confidence you need to make sound decisions during a divorce and throughout the rest of your life. As you navigate this major life milestone, give me a call at 845-627-8300 if I can help in any way.

    Beth Blecker

    Beth Blecker

    Financial Life Planner and Author

    One of my greatest pleasures is the ability to help women get their finances under control after a major life transition, like a divorce, death of a spouse, changing careers, or becoming a caregiver. Also I enjoy mentoring young women entering financial planning. They need the support and guidance of women like me, who have been through some of the trials and errors of succeeding in a male-dominated business. Helping women so they may be able to live the life they love, just like I do, is so rewarding.

    We will provide you useful and timely information you can use to be #financiallyfearless