We all go into marriage hoping for the happily-ever-after ending, but often it doesn’t work out that way. The divorce process requires both spouses to make a host of difficult decisions around financial topics that may be unfamiliar, complicated and emotional – yet these decisions will help create the foundation on which each person builds a new, fresh start.
If you or someone you know is contemplating divorce, or even if you are already in the middle of the process, the time to find professional financial advice is now. Partnering with a certified divorce financial advisor (CDFA®) can help you with those financial decisions. Here are three tips to consider regarding your financial investment strategy during divorce proceedings, shared with us by Sarah Avila, financial advisor and certified divorce financial analyst with VLP Financial Advisors in Vienna.
Tip 1: Recognize why professional advice is in your best interest
The investment and financial needs of recently divorced individuals often look very different than that of married couples. A trusted financial analyst will get to know you and your needs so she can design a portfolio tailored just for you.
“As a certified divorce financial analyst, I work with the client pre, mid and post-divorce,” Sarah says. “By the time the divorce is finalized I generally have a sound understanding of their budget, assets, liabilities, concerns and longer-term financial needs.”
Tip 2: Understand what a CDFA® can do for you
When someone is going through the divorce process, they may feel a lot of uncertainty about their future financial landscape.
“One of the biggest questions is whether their settlement agreement is in their best financial interest,” Sarah tells us. “I work closely with clients and often their attorneys to look at the client’s complete financial picture and, if necessary, help come up with settlement options that best suit their needs.”
A CDFA can provide you with unbiased, straightforward advice specific to your situation. Where lawyers may fight for legal agreements that make their clients happy in the short term, CDFAs® take the emotion out of negotiations and instead aim for sound, sensible financial advice for the long term.
Here are a few of the common issues Sarah advises on as a CDFA®:
- Considering whether the client can afford to keep the marital home and if not, helping them determine what they can afford;
- Evaluating spousal support negotiations;
- Educating the client on the tax implications on the sale of investments;
- Understanding the present value of a pension plan;
- Projecting life insurance needs on the ex-spouse if applicable;
- Educating the client on Social Security as it pertains to divorce;
- Developing a full financial plan and continuing to work with the client post-divorce to ensure they stay on track with their longer-term goals
Tip 3: Pull together documents and information as soon as you can
Sarah recommends you do the following to prepare for negotiations:
- Try to get a good handle on your budget by tracking household expenses
- Know what you and your spouse own and what you owe
- Begin collecting account documents (regardless of who’s name they are titled), such as:
- retirement account statements,
- bank accounts,
- 529 college plans,
- car loans,
- mortgage statements,
- tax returns, etc.
- Lastly, engage with a CDFA® as soon as possible, versus waiting until the end of your divorce.
Working with divorcing couples is only a part of what Sarah does in her role with VLP Financial Advisors, but she sees it as an opportunity to assist clients in a meaningful way with what can be a very emotional and difficult time in their lives.
“Divorce is a difficult and stressful time but it’s also an opportunity to start fresh. I love being able to help clients build a financial plan and make longer term projections based on their new situation,” she says. “From my experience, when clients begin to get a clearer picture of how things might look for them down the road, they start to feel better and gain confidence that they will get through this period. They often come out of it feeling more empowered and in control of their future, which is exactly what I want for all my clients.”
About VLP Financial Advisors
For more than 30 years, VLP Financial Advisors has worked successfully and effectively with all kinds of families and individuals, retirees and business owners, women and men — all pursuing their own aspirations, each investing and saving in the ways that make the most sense for them.
VLP specializes in investment management and financial planning for individuals, families and organizations, and 401(k) management for small businesses.