Five Ways to Address Financial Concerns During Divorce

For many people, the prospect of divorce raises serious concerns about their financial future.  Many divorces are prompted, at least in part, by stress around financial issues and the possibility of divorce often adds to that stress. Your ability to make sound financial decisions during your divorce is critical to you and your family.

Regardless of the process that you choose, it is very difficult to obtain a satisfactory outcome without getting significant professional help.  And because good professional help is generally expensive you are likely to spend more than you had hoped to spend. However, there are several ways that you can reduce your costs and there are many ways to make sure that you get something of value for your investment.  The five best ways too reduce the cost of divorce are the following:

1. Reduce Conflict
2. Work Together to Find Creative “win-win” Solutions
3. Effective Employment of Divorce Professionals (Getting the right people for the job)
4. Preparation/Things you can do on your own
5. Improving Financial Skills
1. Reduce Conflict

Most of the money spent during on a divorce relates, directly or indirectly, to conflict.  If you and your spouse are able to find ways to reduce conflict without significant professional assistance, you will reduce your costs significantly.

If you and your spouse are not able to reduce the conflict on your own there are processes designed to help you reduce the conflict before things get out of control. The amount of conflict will also depend on the process that you choose for resolving your divorce issues.   If you wish to learn more about those process choices at this time, click here.

2. Work Together to Find Creative “win-win” Solutions

Divorce is often treated as a “win-lose” process in which one person has to be the “loser” on each issue.  This is an expensive way of thinking and can often result in both spouses losing much of their hard earned money trying to find a “winner”.  In truth, the only  possible “winners” in those scenarios could turn out to be the attorneys that get paid a lot of money trying to establish a “winner” in a no-win situation.

By contrast, if you and your spouse can, with help, learn to work together, there are truly “win-win” scenarios that can cause both of you to save on taxes or transaction costs during the divorce so that you can both come out better financially.  There are special tax rules relating to divorce that provide couples with opportunities to save thousands of dollars if they are able to work together.  There are also rules relating to real estate and retirement accounts in divorce that can help meet cash flow needs and reduce costs as well.  These saving methods will need to be explained in more detail by your attorney or financial neutral.

In addition, since most divorce agreements involve issues that will change over time, particularly if you have children or spousal maintenance issues, it is critical that you have an agreement that will be durable over time or an agreement that can be easily modified.  Saving money at the time of your divorce, only to find yourself involved in a dispute with your spouse two years later, will cost you more money in the long run.  This “get it done right the first time” principal is the divorce version of the old carpenter’s adage to “measure twice and cut once.”

3. Effective Employment of Divorce Professionals (Getting the right people for the job)

When most people are asked about reducing the financial cost of divorce, they generally think in terms of reducing attorneys’ fees.  It is true that attorneys’ fees comprise the most significant direct cost of divorce, so reducing legal fees is central to this discussion.  In truth, while there are some times in which the attorneys fees you spend will be a waste of money, there may also be times when the legal fees you spend will have you far more than the cost of the divorce.

The best way to reduce the cost of attorneys, (and other professionals in the divorce), is to think in terms ofeffective use of any divorce professionals in your case. Using an attorney to help you understand the law, understand your process choices, assist you in negotiating your settlement, and to help you carefully evaluate your options at each step of the process can be a very good investment.  On the other hand, having your attorney generate unnecessary conflict through arguments or generate excess documents,  write lengthy letters or wait around in courtroom halls is generally not a good use of your money and, at times can actual be counter to your interests.  Those clever legal arguments that your attorney writes in a letter may feel good on an emotional level but may in fact make it harder for you to get the settlement that you want. One of the main ways to make sure that your payment of attorneys’ fees is reasonable and necessary is to consider whether you are working on an issue that requires the skills of an attorney.

While divorce is, overall, a legal process, only a fraction of the issues involve legal expertise.  There are emotional, financial and issues that may be more effectively addressed by other professionals.  For example, having your attorneys provide parenting advice may create unnecessary expense and may actually prevent you from obtaining the best parenting plan for your family.  Employing financial neutrals, chid specialists, coaches or mediators to do some of the work will often reduce your legal fees and allow you to achieve a better outcome.  For more information about how to engage other professionals to help you, go to the section on Process Choices.

4. Preparation/Things you can do on your own

There are many things you can do on your own that will reduce your costs of divorce that involve, in one form or the other, preparation.

The most tangible aspect of preparation is the gathering of the necessary information.  A very large portion of divorce costs is related to gathering information. The formal method of gathering that information is often call discovery by divorce attorneys.  Formal discovery can be extremely expensive and, in most cases, is unnecessary.  If you are good at gathering information, your time spent getting your documents together, working on your budget, etc. will save you a great deal of expense.  Your attorney should provide you with some forms and other direction regarding the kinds of things you need to gather in your case.  We have provided a samle form so that you can see the kinds of information that your attorney may want from you and so that you can begin gathering some of the information that you need.

Download a sample form showing the type of information gathered in many cases

In addition to preparing the necessary documents, you can save money by preparing yourself emotioanlly.   Divorce is an emotional time and much of the expense of a divorce is spent an addressing these emotions.  It is very natural for people to experience significant anger, sadness or fear during a divorce.  It is generally best to acknowledge that these emotions exist among even the healthiest divorcing people rather than denying or stuffing these emotions.  It is also critical to look at getting the help you deserve in addressing these emotions, through therapy, support groups, religious organizations, coaches and/or genuine support of friends and family.

5. Improving Financial Skills

One of the biggest ways to save money during a divorce, and to help you financially in the years that follow the divorce, is to look at improving your financial skills.

In most marriages, there is at least one spouse who is not sophisticated in handling the financial issues.  If you are that spouse, this may be a good time to “catch up” by learning about things such budgeting, financial planning or investing.  While you will have people to help you in these areas and therefore do not need to become a financial expert, increasing your comfort in these areas can help the process go more smoothly and can save you money for many years.  Choosing a divorce process that allows you to improve your financial skills could be one of those “value added” decisions that may save you a great deal in the future even if you have to invest something on this type of education at the beginning.

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