Finance

When it All Comes Down to the Blender: The Value of Personal Property in Divorce

Divorce, Finance, General

When it All Comes Down to the Blender: The Value of Personal Property in Divorce by Rachel Alexander{6 minutes to read} Personal property, furnishings and personality are typically encompassed by the objects that reside in marital (and secondary) residences. Included in this group are furniture and tchotchkes, like that horrible thing from HomeGoods that seemed like such a good idea at the time, but now takes up half the dining room table.

Property (as distinct from real property, which refers to land, homestead, and so forth) includes antiques that could be museum quality, and the old sofa in the basement. Some of it has real meaning to you, and some of it, no offense, has got to go!

Oftentimes, the property comprises the least valuable portion (monetary) of the marital estate. However, it can still be a subject of contention and fierce assertions of ownership in high-conflict cases. Clients can spend tens of thousands of dollars arguing over something that has less than a fraction of that value.

Usually, a settlement agreement will simply state: “The clients will divide the personal property to their mutual satisfaction within 30 days of the execution of this agreement,” or something similar. Entrenched arguments over personal property typically indicate underlying conflict in the case, rather than the monetary or intrinsic value of the objects themselves.

So, “when it all comes down to the blender,” what might be helpful for people struggling with dividing personal property?

It can be useful to do a bit of self inquiry without inviting any judgment. You might ask: What is my relationship to this particular object? What feelings come to me when I am with it? Sometimes, it is a sense of comfort, continuum, as with the blue ceramic pitcher one woman had since college.

Different objects bring different things out in us. They have different significance, and that is often well beneath and beyond what the object actually is. In evaluating things, it can be helpful to ask questions such as:

  • Is there inherent utility?
  • Is there a dollar value to replace this that makes me attached to it by necessity? (I can’t buy two more sofas at this point based on my divorce settlement.)
  • Is this something that I’m actually going to want and maybe want my children to have one day?
  • Is this an object I might be able to use for another 5, 10, 15 years?
  • Is this something that is going to cost me $500 to get it hauled away to a dumpster within six months?
  • What is the future life of this thing and how does it impact my life, environment and economic future?
  • Would a picture of it suffice, perhaps as a screensaver, or is the three dimensional object needed for it to have value?

Some objects may really be worth their weight in gold; most of them are just heavy and hurt your back when lifted.

Try orienting yourself with a vision of what you want your post-divorce space to be and how you want to be in it.

  • What things are needed to populate this space so that it supports you and your family? There is a need to have a table in the kitchen; there’s a need to have a mattress in the bedroom. These are things that obviously respond to our actual needs.
  • Is this something that is replaceable at the mattress store? If we are unable to decide who gets the bed, is there a monetary amount I would take or pay that would make it okay either way? Offsetting objects with a dollar value can help equalize the division of property.

Factor in:

  • The cost of relocating a piece of furniture or storing it for several months versus replacing it;
  • The value of leaving certain things as they are, so as to not disrupt a familiar household that provides consistency for children;
  • The expense of maintaining a given object, and the possible freedom of not having it in one’s custody.

Sometimes a cigar is just a cigar — though no true Freudian believes that — and neither does anyone in the throes of property division in an acrimonious divorce.

What, too, is the value of not having the object? There is a value to a certain kind of spaciousness and freedom from too many things, too much encumbrance. It’s lovely to be in an uncluttered space. It’s delightful to have a few chosen pieces rather than a bunch of junk from the dollar store. It can also be a pleasure to take time to decide what a particular space wants and to find that “just right” piece that belongs.

Perhaps this is the time to rediscover your own aesthetic. To freshly choose those things that support an environment that is reflective of you.

So much of life is implied in what we hold and what we let go. Be thoughtful and kind to yourself, one another, and your things, as you transition into new habitats and new belongings.

Rachel AlexanderRachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

Dissipation Revisited

Divorce, Finance, Mediation

Dissipation Revisited by Rachel Alexander{6:36 minutes to read}  Dissipation occurs when one spouse spends marital funds on something that has nothing to do with the marriage. It could be deliberately offshoring funds into a secret bank account in preparation for divorce. It could be spending marital money on a clandestine relationship such as an extra marital relationship.

This last example is the focus of our article. It is a scenario fraught with emotion and difficulty. From my analysis, the trouble comes in when we’re trying to address a complex, multidimensional problem with a one dimensional monetary solution. In divorce, dissipation can be addressed by identifying monies spent outside of the marriage and returning them to the marital estate.

Let us take Willa, for example (a fictitious person with an almost fictitious name). During an unhappy time in her marriage, about a year before moving for divorce, she had an affair with another man. She bought a boat for the sole purpose of spending afternoons on the lake with him. In the divorce, it was discovered that she had spent $20,000 on the boat, taken from the joint marital checking account. The husband had never seen the boat much less benefitted from it. The cost of the boat might constitute dissipation, and the wife, Willa, would need to return the $20,000 to the marital estate. In the event she does not literally have the funds at her disposal, it would be offset from another asset or otherwise credited to the husband in equitable distribution.

Here is the rub. $10,000 of those dollars are Willa’s to do with as she wants. In general terms, if it has been a long marriage, the marital estate would be subject to equitable distribution at something close to an equal proportion (i.e. 50/50). If the claim is found in the husband’s favor and Willa is ordered to make him whole for the extra-marital expenditure, the $20,000 goes back into the marital estate to be divided between both of them. The husband, therefore, is only entitled to $10,000.

While that might help equalize things in a certain way — returning money that was otherwise essentially misappropriated or wrongfully taken from the marriage — it would seem to our fictional husband that he should be returned the full $20,000. Why should Willa have gotten any part of that to enjoy outside of the marriage? Why should he not be entitled to more than just $10,000? Why is there not some kind of penalty because of Willa’s “bad act?”

Here is the other rub. There is no legal remedy that neutralizes a betrayal or breach of trust. If something is stolen, and then returned, the victim is still not relieved of the experience of being robbed. There is no adequate legal remedy to heal the human heart. When a return of monies is conflated with anything more than a financial restoration of sorts, there will be no satisfactory resolution.

In divorce, there is no monetary reward for the wronged party. The only clumsy remedy we have for a marriage that has unraveled past repair, is divorce. A good divorce can fairly distribute material assets, but cannot deliver fairness into non-quantifiable matters.

If you do not want to have pain and suffering, do not get married. If you do not want to waste money, do not leave the house. This is sort of the pay to play. When you get divorced, you do not get the marriage you should have gotten. All you get is an end to the very human, flawed marriage that you had.

None of this may be terribly palatable, however, keeping the following in mind may prevent dissipation issues from becoming entirely poisonous: more often than not breaches of trust, including infidelity, do not occur in a vacuum but rather in the chaotic, complicated world. While the direct actions of one party might be “blameworthy,” often this viewpoint can only be maintained by looking exclusively at one corner of a very large picture. Though certain acts have been codified into law, most marriages are comprised of a range of actions and reactions, loving, heroic deeds and thousands of blunders and missteps. Most of what occurred does not bare tangible evidence that can be addressed legally or financially. But most often, the fabric of any particular marriage, including its frayed bits, is comprised of the contributions of innumerably hued threads woven by both people into the relationship they made together.

Though blame might feel momentarily vindicating, it provides no sustainable relief or ease. Fueling it is often at the expense of establishing a more comprehensive, balanced narrative. A truer narrative is one that includes room for historical intricacy and respect for the inherent, universal puzzlement of being in relation to one another. When there can be a willingness to share responsibility for what has happened — not bear all of it, but allow for the importance of your inclusion as a participant — a sense of empowerment can return. While this suggestion may seem paradoxical, a shifted perspective can help restore a sense of efficacy, which is particularly needed when broaching difficult consequences and unwanted outcomes.

Rachel AlexanderRachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

If I Can Waive Alimony, Why Can’t I Waive Child Support?

Finance, General, Parenting

If I Can Waive Alimony, Why Can’t I Waive Child Support? by Rachel Alexander{5:45 minutes to read}   If I can waive alimony, why can’t I waive child support?

Fair question. Here’s why: Alimony and child support are two different things and are treated differently under the law. Alimony might be a right of a spouse, but child support is the right of a child. And just like I cannot waive my neighbor’s rights to quiet enjoyment, I cannot waive the right of my child to be supported by both his parents.  

Distinguishing one’s child from one’s self is emotionally nodulous. When legal rights and obligations affect parenting decisions, parents may feel that a most personal aspect of their lives is being invaded.

Under child support law, a child has certain rights and privileges, and is separate and distinct from the parent. However, under other laws the parent is liable and totally responsible for the child as though not fully distinguishable. This complexity is slippery to tread not only in the legal field, but in psychology and philosophy as well.  

When is a child recognized as a detached being even though still wholly dependent upon the parent?

Fortunately, for this article, we do not have to realize the depths of existentialism, separation, and individuation to glean the following:

Children have the right to financial support from both parents.

Child support is not meant to penalize or punish, but to protect. Children of divorce, historically, could face economic instability and deprivation, and legally mandated support was designed to address this.

Child support is commensurate with the income and finances of the parents. Support considers the needs of the children, what the child has become accustomed to and reasonably expects, and what can realistically be provided given the family’s increased financial obligations in transitioning from a single into a two household family.

Supporting one’s children is simply a codification of what parents are already doing — supporting their children. The privilege and aggravation of budgeting around your children’s best interests — their hobbies, needs, hopes, future education and career aspirations — is an integral part of progeny. The ability to have children, love, raise, and provide for them is one of life’s blessings. Divorce neither retracts this gift nor relieves parents of their obligations — financial or otherwise.

New Jersey has child support guidelines which provide a recommended monetary amount for the rudimentary needs of the child, based on the income of the parents and the time the child will reside with each parent. However, often the child support recommendation is insufficient or untenable for the family, or the child’s actual needs. Additionally, many expenses fall outside of child support, but within the parents’ attendant obligation to provide.

In divorce mediation, child support can be managed so that it works for all parties. Parents may set up a distinct account to be used for the child, each contributing to the account in a manner based upon his/her income. Parents might agree to each pay directly for specific costs for the child in a manner established during and consistent with the child’s life so far.

The central, organizing principle is, as always, the best interests of the child. Providing financial consistency and stability, to the extent possible in light of the changing circumstances, is in the best interests of the child. Appreciating child support as anything other than for the child is a sure way to derail the family and well-being of the child. Financially demonstrating a toxic relational dynamic through finances, particularly by compromising the child’s sense of financial stability and attachment security, is clearly inconsistent with prioritizing the child.

Parents are not on the hook for support because they are getting divorced — they are obligated because they have children. In fact, the commitment of financial responsibility has precious little to do with your spouse. It’s about your child.

When in the dark, this is the guiding light and principle. When we can meet our children’s needs we do so because we are parents. Because but for us, they would not be here. Because we love them and they are our primary concern.

This is part of the social contract and the human compact we entered. We support our young within the limits of our capabilities, financial circumstances, and what life has brought.

Child support is not so much about divorcing as it is about parenting.

Rachel AlexanderRachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

 

“Someday” and “Maybe” Numbers: The Challenge of Dividing Retirement Assets Part 3

Divorce, Finance

“Someday” and “Maybe” Numbers: The Challenge of Dividing Retirement Assets Part 3 by Rachel Alexander{4:00 minutes to read} In Part 2, we discussed marital vs non-marital retirement assets and how some of those assets require an actuary or other expert to figure out the “present value” before the asset can be divided.

We now arrive here: How do folks equitably divide these assets? Particularly because the present value doesn’t actually exist in a divisible form. It’s a theoretical, projected number!

Below are some popular options:

QDRO (NJ QDRO Overview)

A court order goes to the plan administrator, directing it to divide the asset in the way set forth in the order. This method avoids any tax consequences pursuant to this division at the time it is made. When the plan participant retires, each party receives a monthly sum directly from the plan administrator, as if each had a separate pension. Once this is complete, the parties need not have contact with one another regarding distribution as the administrator manages this directly with each party.

Offset Against Other Assets

Sometimes parties chose not to divide the retirement asset at all, and instead trade its value against another asset. For example, maybe there’s $200,000 of equity in the marital home (the husband and wife each entitled to $100,000) and $200,000 present value in the pension to which each party would be entitled to $100,000. The husband might keep the pension and wife keep the marital home. Admittedly, these are different asset classes; however, part of equitable distribution is not just halving the baby but identifying workable solutions aligned with the family’s particular needs and choices at the time.

Life Insurance Policy

A bit more creative, instead of dividing the pension at the time of divorce, the parties agree that when it is in payout status, the recipient will pay a portion to the alternate payee directly, perhaps as alimony or equitable distribution, depending upon tax consequences and legal restrictions. Parties might choose this option for two reasons:

  1. The monthly amount is not discounted by the administrator, the way it would be if it was divided into two separate pensions pursuant to a QDRO.
  2. The parties avoid the costs of a QDRO, which, though not significant, can increase the costs and timetable of the divorce.

To compensate for the risk taken by the alternate payee – one of which is that the participant spouse dies before reaching the date of pension payout, forfeiting the entire pension – the participant will obtain a life insurance policy benefitting the alternate spouse in an amount that will replace the pension payments in the event of the participant’s death. Having the life insurance covering at least some of the risk is an essential part of this approach.

Conclusion

Informed decisions make for better agreements and a better night’s sleep. Knowing the values of assets, even if you ultimately wish to waive any interest you have in them, is good practice. It helps with clarity and can inform other aspects of your agreement. Divorce is laden with pitfalls that can lead to regrets, nausea and insomnia. In my opinion, taking the additional time and making the investment to learn the values of potentially significant assets can help people sidestep all three.

Rachel AlexanderRachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

“Someday” and “Maybe” Numbers: The Challenge of Dividing Retirement Assets – Part 2

Divorce, Finance

“Someday” and “Maybe” Numbers - Part 2 by Rachel Alexander{4:00 minutes to read} Just because we determine a value for something does not mean we divide it! Often spouses are concerned that the mere mention of an asset puts it on the auction block and forfeits their exclusive rights to it. Not so!

Getting a comprehensive picture and value of ALL assets is an important part of creating a solid settlement agreement. An agreement should even specify assets whose separate nature is undisputed, with the other party waiving any rights, title or interest thereto. Full disclosure helps an agreement stand – stopping either party from claiming he entered into the agreement without full knowledge of the vital facts upon which he relied.

Retirement assets can be complex; difficult to understand and value. Determining the portion of an asset that is actually subject to equitable distribution is one of the intricacies parsed out below.

Marital vs Non-Marital

If the parties were married for the entire time the participant [in the retirement plan] worked and the pension plan was in effect, its whole value is marital, and the “alternate” spouse will be entitled to an equitable share. Depending on multiple factors, including the length of the marriage, this share could be as much as 50%.

Sometimes a portion of the pension was premarital.

If, for example, the plan participant worked for 5 years prior to the marriage, the portion earned during those 5 years is premarital. That means it is separate property and not subject to equitable distribution.

However, how do you determine the premarital value of the 5 years of pension? You cannot simply look at its value on the date of the marriage! Stay with me here. Because early contributions accrue interest, that interest is also separate property and needs to be valued.

So if a plan is worth $10,000 at the date of marriage, you can’t simply subtract $10,000 from the total as the nonmarital portion – you must also see what the gains on the $10,000 were for the length of the marriage until the filing of the complaint. How was the $10,000 invested? How did each of those funds perform over the 5 years? This requires analysis! The $10,000 might actually be worth $30,000. This is not visible to the naked eye.

The eye of the actuary, however, is greater than 20/20!

So, to summarize: the pre-marital portion must be qualified, backed out, and then a present value given for the marital portion. Defined benefit plans, usually pensions, are complex assets that typically require the expertise of an actuary to properly value.

What does the actuary do?

An actuary (or other expert such as a forensic accountant) must read the pension statement, annual benefits description, and Summary Plan Description (SPD) to understand the benefits. She will look at dates of birth of both parties, date of marriage, actuarial tables, life expectancy for the beneficiary and the alternate beneficiary. Then, the expert will provide a present value and, if necessary, the marital and non-marital shares of the asset.

In the final Part of this series, we will talk about some popular options that divorcing couples use to divide assets with a theoretical “present value.”

Rachel AlexanderRachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

“Someday” and “Maybe” Numbers: The Challenge of Dividing Retirement Assets – Part 1

Divorce, Finance

“Someday” and “Maybe” Numbers: The Challenge of Dividing Retirement Assets - Part 1 by Rachel Alexander{2:48 minutes to read}

“Hands off,” decries one spouse, “I worked for this, not you. Back off, you lazy sot!”

Retirement Assets

While I loathe being the bearer of what could be received as bad news: assets earned during the marriage are marital property and subject to equitable distribution. This includes assets earned directly from the efforts of just one party. This asset class includes retirement savings plans, 401(k)s, 403(b)s, and pensions (both defined contribution plans, and defined benefit plans). Often, these assets are complex and require professional valuations in order to glean their true, marital value.

One party might say: “Sure, I have a pension. It says I’ll get $1,800 every month, when I’m 62! I’m only 45 now, and can’t touch anything. Plus, what if I don’t retire? What if I lose my job or get laid off or worse? I might get nothing. How can I give you part of something I may never receive?”

This is true, however, we must widen our lens to take in the whole picture and the concept of…

Present Value

Participants usually receive pension statements that state projected monthly payments as of a certain age of retirement. In order to equitably distribute marital assets, we must calculate their “present value.” Present value means an asset’s current worth; that is, what it would have to equal today (e.g. $470,000) in order for it to produce a particular projected monthly amount (e.g. $1,800) down the road, say, in 17 years. The $470,000, not the $1,800 per month, is the amount we have to divide in a divorce.

Confusing? Yes. Particularly because we are no longer working with real numbers. We have entered the mysterious, worrisome and sometimes Escherian world of mathematical possibilities. A world of “maybe numbers” assembled from actuarial charts of life expectancy and statistical probability. To make sense of this world, we need the expertise of an actuary.

What are the actual values? What about the portion earned before the marriage or after we filed for divorce? And how do we divide these assets?

Excellent questions!! Stay tuned for Part 2!

Rachel AlexanderRachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

It Takes 2, Baby!? Or, What Happens When Only One Person Wants the Divorce?

Divorce, Finance, Mediation

It Takes 2, Baby!? Or, What Happens When Only One Person Wants the Divorce?

{6:48 minutes to read} In New Jersey, divorce requires only one willing party. So what about the other party? The one who doesn’t want the divorce? And how can this work in mediation?

Mediation is sometimes believed to be an alternative only when both parties want divorce. I would suggest that mediation is still the best alternative, even for the party who doesn’t want to end the marriage.

Because a divorce will occur, with or without the consent of the non-moving party, the question becomes not whether there will be a divorce but how it will be reached. Mediation is always the better process, but perhaps even more so for the one who hasn’t had the opportunity to initiate the divorce.

In this situation, mediation has the potential for sensitivity to such issues as:

  • How can a reluctant participant be helped to face the inevitable and unwanted change?
  • How can the situation be normalized, understood and processed when its very nature is fraught with pitfalls of disempowerment and potential humiliations?

First, parties are helped to appreciate the situation as quite customary. Rarely are two people on the same emotional page at the same time. Usually, divorcing couples are “emotionally staggered,” and often this has more to do with individual thresholds for given situations. Both people are unhappy, but only one person’s unhappiness barometer has exploded.

People divorce because one or both parties are not thriving in the current situation. A therapist friend of mine once said, “If a relationship isn’t working for one person, it’s not working.” That means no matter how much one person wants the relationship, if their partner doesn’t, neither person is in a workable relationship. More about this in a moment.

In Inter-Relational Focusing, one branch of Focusing, it is specified that the intent of any interaction is to improve the lives of its participants. Relationships are to move life forward. They’re not, as commonly believed, to scoop out the other’s proverbial insides like spaghetti squash and ring them out to meet one’s own needs. There is the me, the you, and the what’s between us. Only the last part is the relationship.

By definition, if one party wants to continue the relationship in spite of the knowledge that the other person needs to leave it, she is not behaving congruently with a loving partnership. A loving partnership has room for both people’s needs. It respects the other, even when the other’s wants diverge from one’s own. In a healthy relationship, both participants must be unwilling to compromise the well-being of the other.

But a marriage is not necessarily a relationship, just as a romantic or loving relationship doesn’t necessarily constitute a marriage. It’s often helpful to unpack these things in order to identify what’s actually wanted. Often marriages develop into organizations, with friends and second homes, children and activities, a structure that provides comfort and stability, identity and belonging. These are important to almost everyone, but they can be distinct from the actual relationship between husband and wife.

Modern marriages in this country are no longer arranged, but they often morph into “arrangements.” In divorce mediation, when one spouse doesn’t want the divorce, it’s helpful to know why. Really, why – that is, what they are holding on to, and what they are most afraid to lose. It’s almost never the loving companionship of their spouse.

Sometimes they are wanting some aspect that the marriage provided, but that is not necessarily about the other person. Sometimes the heartbreak one thinks he is experiencing has little to do with the relationship, but more to do with other aspects of married life.

This is important, because what’s really valued and needed can be both addressed in mediation and worked towards after the divorce. The divorce itself, while still unwanted, can be understood as less of a total loss of everything. Much of what feels threatened by the divorce can be supported and maintained.

Some examples from mediation:

  • A parent who equates divorce with “losing his family” is helped to understand that his imagined version is incommensurable with the reality that could have him sharing physical custody equally and spending time with his children virtually daily.
  • A spouse who associates divorce with imminent poverty is helped when she learns that appropriate financial support will afford her a standard of living reasonably comparable to what she currently experiences.

Recently, I asked a client who absolutely did not want his marriage to end, this: “If it wasn’t a marriage, if you were just in a relationship, with no financial implication, would you fight this hard to keep it together?” Without hesitation, almost as if the question was absurd, he cried, “No, absolutely not.” Sometimes the attachment is not to the other but to what has been created during the time spent and in cooperation with the other.

Identifying what is hard to relinquish reveals what is valued and what can be worked with and carried forward into the next chapter of life. Loss is implicit in divorce. In fact, loss is implicit in life. Clarifying what we are actually losing can help us regain a foothold and focus our energies on what we can control and how we intend to shape our lives going forward.

Rachel Alexander

Rachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305
 

How to Save Money and Affirm Life by Mediating Your Divorce

Divorce, Finance, Mediation

How to Save Money and Affirm Life by Mediating Your Divorce | Rachel Alexander{4:24 minutes to read} No one wants to spend more money than absolutely necessary on their divorce. No one has a divorce account. There is no particular tax benefit or refund for fees spent on divorce.

My clients represent a whole range of economic resources, but no matter what their financial situation, they do not want [or need] to spend money unnecessarily on their divorce. So, I want to invite you, who are thinking about divorce, to give some careful thought to where you want to invest your resources:

Are you willing to set aside $40,000 or $50,000 each to pursue an adversarial process?

If you could finalize your divorce for under $10,000, are there things you would do that could bring delight?

Could that money be used for something restorative or rejuvenating, once the divorce process is complete?

What could be done with an extra $20,000-$40,000 to spend? Pursuing the adversarial process can easily cost that much and more. Instead of wasting money on litigation, how about:

  • Spending a week in Nantucket;
  • Paying off credit-card debt;
  • Paying for summer camp for the next few summers;
  • Plumping up college savings;
  • Taking the kids apple picking this fall and letting them pick too many apples, without protest;
  • Getting a massage once a month;
  • Saying “yes” more often to the children, and yourself, for small indulgences;
  • Eating out one extra night a month;
  • Saving the whales, or helping to anyway;
  • Treating an elderly relative to his plane ticket to visit you;
  • Keeping the domestic help you would otherwise be giving up;
  • Keeping your gym membership;
  • Taking a vacation with friends;
  • Going to that spa or baseball camp or yoga retreat on your wish list;
  • Creating an account for those “incidental” expenses that always arise and cause stress—e.g.travel soccer fees, hotel rooms, uniforms for cheerleading, party dresses, interview clothes, birthday party gifts—and use its existence to reduce your anxiety over money.

The idea is to link up that game of what would you do if you had x amount of found money with saving money in your divorce.

No one (apart from a sadist) would pay $40,000 for a stressful, painful, acrimonious, protracted, loss-of-control, bilious experience. No one would knowingly pay to have pain, drain their family resources—both financially and emotionally—and incur stress and debt that bleeds into every area of life, at least for a time.

Managing the conflict of divorce through mediation substantially reduces angst and cost. Mediation simultaneously increases possibilities for creative resolutions while addressing and managing sources of stress. This is good for the family and good for the pocketbook.

Spending money can be a pleasure, not a trauma. When families spend money wisely—in order to save money—they maintain more control of their lives.

You are invited to start thinking about what money can be happily used for. Having several thousand dollars could really be a pleasure, and could, if it’s used thoughtfully, be life-enhancing. The idea is to use money for life affirming rather than life draining endeavors. Having a bit of extra money post-divorce is antidotal for the money-fear that tends to follow a divorce.

Divorce or no, dream a little bit about what would be happy and fulfilling. Save your money by avoiding an adversarial process. Approach your divorce laparoscopically, where you use funds judiciously to further resolution. Put the savings toward something that brings peace, joy, and, above all, happiness.

Rachel Alexander

Rachel Alexander
Alexander Mediation Group
119 West Valley Brook Rd
Califon, NJ 07830
(908) 832-2305

Alimony Ain’t Easy!

Finance, Mediation

{8:18 minutes to read} AAlimony Ain’t Easy! by Rachel Alexanders a divorce mediator and family law attorney, I am often asked, “What’s the formula to calculate alimony?” In New Jersey, there is none. We do have a new alimony reform law adopted in September 2014, about which there has been (and continues to be) a lot of confusion. This blog post looks at the current factors used to determine alimony.

Continue reading Alimony Ain’t Easy! →

A healthy approach to creating a Post-Divorce Budget

Finance

Budgeting – the very mention of it – sends many people into something like anaphylactic shock.  They stop breathing, rouge, and stare straight ahead, into the space where the abyss resides. There is something paralyzing, overwhelming and claustrophobic about the notion of being constrained by rules and limitations around spending.  Feelings of deprivation may be aroused.  Fear of lack, loss and the unknown can also be triggered.  

One of the essential parts of divorce is budgeting.  In order to arrive at the terms for settlement, clients must pull together their current marital budget as well as their anticipated post-divorce living expenses.  A post-divorce budget provides important data of how the parties lived together and what will be needed to live separately.

In reviewing the actual definition of the word “budget” I looked at its synonyms. Most of the words that can stand in for budget have to do with cost-cutting and imply less quality, such as cheap, bargain-basement, low-end, inexpensive, dirt cheap, and perhaps best of all, el cheapo. What’s better than dressing up something unwanted in a foreign sounding cloak?

Furthermore, our common associations with the word budget have to do with such concepts like a 50 million dollar film budget or national budget – both of which have an unreal and an obtuse quality for most of us.

It’s no wonder we struggle to warm up to this word with its less-than, negative and vague connotations, particularly when it comes to the anticipation of a divorce budget. So let’s refrain. Because language is important when looking to relate to things we’d rather avoid, we need as much help as possible.  If we introduce the notion of something more appealing, that invites a heightened sense of control and a movement towards what’s wanted, perhaps that would help.  

Instead of budgeting what about estate management or financial governance? Try those on and see how they feel. Try out a few of your own. Situate yourself in a space of what is wanted and how you’d like to shape your relationship with your finances to create a satisfying and long term alliance.

Recently I met with Dan Jago, a financial planner at Main Street Wealth Management in Bedminster/Bernardsville, NJ.  He works primarily with 30 and 40-somethings who are often brand new to financial planning. Dan initiates what is often their first conversation around budgeting, or if you prefer – financial governance – and he speaks to how he approaches it in a fresh and helpful manner which I appreciate. What follows is an outline of how people might begin this conversation (or inner dialogue) around this important topic, particularly regarding a divorce budget. I have integrated Dan’s input with my own.

What’s Happening? (Preparing for a post-divorce budget)

First, from a non-judgmental and non-critical stance, without an obligation to change a thing, take a look at what you are currently doing around money. What are your spending habits? Are you at Starbucks everyday? Do you pay bills online? Use auto-deposit for your paychecks?  Mostly use cash? Rely on one or several credit cards?  With a guide such as Dan, you can evaluate current spending patterns and habits and formulate your post-divorce budget.

Just as you would make someone’s acquaintance with politeness and curiosity, this is how I invite you to approach your current spending. Except in the Wild West of old, we typically don’t meet others with guns blazing, ready for a showdown. Approach you current spending as you would a potential long-term, dear friend. Softly.

What Would You Like To Be Happening?

When it comes to divorce, and establishing your current and post-divorce budget, it is easy to hone in on what’s wrong with what you’re doing, (and by implication, what’s wrong with you).  Focus instead on what you want to create.  

By shifting in this way, you involve a different part of your brain – a visionary part – which has the power to inspire.  Take some time to dream.  Helpful questions might include:  What would it take for you to feel great about money?  To feel secure?  To feel content with your handling of your finances?  What would you like to own, pay off, do, be able to give to your children, family, friends, community, etc.?  What would you like to know for certain?  How will your post-divorce budget be different from your current financial governance when it’s complete?

Once you have tapped into what you’d like, not only can dollars enter the equation, but so can current practices.  Within the benevolent, sunny environment formed by focusing on what’s wanted, we are more equipped to turn to current habits and analyze what can be modified and built in order to bring forward what is desired.  A plan is determined and set in motion.  

Dan and I talked about a few concrete examples.  Take Bob.  Perhaps part of Bob’s plan is to save an additional $100 per month in his post-divorce budget so he can rent a ski house for a week in the winter.  By reviewing Bob’s current habits, Dan and Bob identified that Bob stops in Starbucks every morning on his way to work, spending approximately $25 weekly on coffee concoctions.  Bob enjoys the whole ritual of stopping there – it’s something that get’s him out of bed and on the road.  So rather than asking that Bob forsake Starbucks and his weekday ritual, we might ask if Bob would be willing to switch some of the days out for less elaborate and costly coffee options.  Maybe Mondays are the days when Bob orders his favorite drink.  In consideration of his post-divorce budget and savings goal on Tuesday-Thursday he orders regular coffee, saving close to $15 per week simply by making this cost conscious modification.

This reasonably minor behavioral modification frees $64.50 per month, and gets Bob substantially toward his divorce budget and savings goal.  He needs to find another $35.50 to reach the $100 goal.   

Bob eats all of his lunches in the work cafeteria to build relationships with colleagues and enjoy the camaraderie of his mates.  Although the cafeteria is subsidized, he spends an average of $8 per day on lunch.  By simply carrying a water bottle and filling it at home and from the office water cooler, Bob can cut his weekly beverage costs of $8 per week, reducing his beverage spending by another $34.40, giving him $98.90 in his post-divorce budget (just $1.10 away from his goal).  

What’s important about these modifications is that Bob kept the parts of his habits that served him and that he enjoyed and counted on.  The changes he made didn’t change the substantive nature of his habits and supported all the structural and social benefits he currently enjoys within his post-divorce budget.  

Bob wasn’t told to give up Starbucks or start eating at his desk.  Such draconian measures were unnecessary to accomplish his goal.  They would have felt more punishing than progressive.  Once this is set in place, Bob arranges to have the additional $100 transferred directly from his automatic deposit into his savings or investment account.  He doesn’t need to worry about it again, and his post-divorce budget supports his new goal.  Now when Bob sips from his water bottle, he sometimes has an additional sense of pride and security that his daily actions are providing for his future.  

Control – A Different Approach

By setting goals with a financial advisor for your post-divorce budget, and then refining your day-to-day habits to further those goals, you gain a sense of power over your current finances and future financial life.

When a financial planner focuses on budgeting, you are a participant, not a passive member in the process.  In my experience, many financial professionals do not spend enough time working with clients’ spending habits, as they are focused on investment strategy rather than creating a necessary budget or post-divorce budget.  Much about investing is confusing and overwhelming, particularly for people new to finance, and that can cause the relinquishing of control in favor of sheer hope that the person we’ve selected to manage our money is competent, at least.  This has the same feel of riding a rollercoaster, eyes closed, praying the operator is sober and awake.  No wonder we have anxiety around money and investing, and doubly so when the complexities of divorce are added to the mix!  Developing an understanding of investing and the market is a significant undertaking, and not the easiest jumping off point for many of us.

Conversely, making a budget is a more straight-forward and plausible entry point in working with a professional.  By entering a discovery phase of evaluating your current practices, you ally with your financial professional.  Through actively aligning your daily life with your financial goals, you partner with your planner.  

Once you begin to turn towards your finances, even in a small way, you will set in motion something with wings.  This something, as you attend to it, will grow stronger and larger and ultimately take flight.

This blog was written with thanks to Dan J. Jago, AIF®, whose ideas and input were incorporated throughout.  Dan can be reached at DJago@MSWealth.com or (908) 719-8700.  His website is www.MSWealth.com.