American Capital Planning Blog

ACP Blog, created by Bonnie Ashby Sewell, CFP®, CDFA™, AIF®

The Price of Free Advice

Boy Leaning photo 300x200Joanna made plans to celebrate.  At 10:06 am on February 22nd, 2007, her divorce was finally final!  A bit too early to enjoy an adult beverage, she headed straight for the outlets.  Retail therapy was in store and she looked forward to some healing!  Have any friends who’ve done this?  The people who love Joanna want her to be happy, healthy and healed.  But they also want her to be able to pay the bills she racked up in her celebration.  Joanna’s first stop should have been to her trusted advisor.  Instead, fast forward 7 years when Joanna comes into my office.  She is now in her mid-50’s, has had a few health issues and is still earning about $65,000, not that much more than in 2007.  What has changed, she explains is there isn’t much left in her accounts and she thinks she might have to sell her home so she can send her last son to an expensive college like the first three sons enjoyed.  She pushes all her paperwork across the table.

I can see she hired an ‘advisor’ from a well-known big firm and she’s taken the time to list her expenses on a sheet I sent over before our meeting.  While looking over tax returns, her spending, and her account statements, it’s clear she’s underwater every month by $5,000.  I ask her what plan she’s been working off of until now and she says she was expecting her investments to do better and her money to last longer.  She says at least her ‘advisor’ never charged her for his time.  We lock eyes as she bears a sheepish grin acknowledging the ‘oops!’ hanging in the air.  Back in 2007, Joanna walked away from her 23 year marriage with $960,000 in cash, a paid for home she thinks is worth $975k now, and a $5k/monthly support check that ended last month.

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Divorce

Divorce 300x199Just the word, divorce, can be upsetting to some people. But this word describes best what is actually happening. We could say transition, dissolution, disunion, split or several others. The reason we use ‘divorce’ is because it describes a legal declaration dissolving a marriage and our work in this area is focused solely on the financial aspects of a divorce.

Some people assume our divorce work is depressing. In fact, once a family has decided to live separately, we believe our work helps them build a healthy, secure foundation for the new life they seek and perhaps were meant to live.

When life beats you up, remember, there is no poverty where there is laughter and love.

There can however, be poverty where parties have divorced without ensuring that both parties can 1) pay their bills after the divorce is final and 2) have a foundation on which to build future wealth. In our work with couples or individuals, we opt out of the ‘gotcha’ game that the multi-billion dollar divorce industry plays so well. Attorneys are rarely specifically trained in personal finance or divorce financial planning. They are trained in law which is expertise we do not provide.

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