In many marriages, one person takes on the role of "Blissful Near-Ignorance" about financial affairs. If you were that person and you are now uncoupling, you can be at a real disadvantage when it comes to managing both the divorce and your finances afterward. If your marriage led to things like children, student debt, retirement accounts and/or multiple properties, your financial life can be fairly complex.
We caught up with Geoff Burroughs, a certified financial planner at Harbor Investment Advisory in Baltimore, to talk about how to educate yourself about money during major life transitions such as divorce.
Splitopia: What should someone who hasn't been paying attention to finances in marriage do when facing divorce?
Geoff Burroughs: The half of the couple who didn’t manage the finances typically comes into the process pretty scared; they have no idea what their financial situation is. My first piece of advice is to educate yourself. It’s intimidating for a lot of people to do, but there are resources out there to help. It can be as simple as making sure that both spouses are listening in on conversations with a financial advisor. Most people don’t want to deal with finances—I get that—but saying you should get educated doesn’t mean you need to be an expert. You should just know what’s going on.
I see a lot of my clients start to gain confidence once they start to put in a little effort to become financially literate—and that’s usually an empowering experience for them. They are more confident in everything they do once they get there, because for the first time they feel like they are in control.
Splitopia: What's the first step toward figuring out your new financial picture?
Burroughs: The first thing is to do what I call “setting the table.” Get an understanding of what you have. Take inventory. A big part of that is creating a budget. Most people don’t know how to do that. Most people create budgets, and then forget about them. I see a lot of people, even healthy couples, who have lived beyond their means. I see couples who realize they’ll have to give up a big house, which might have been a status symbol for them, in order to pay for school tuition or summer camp. They’ve never had to make that choice before but now they have to.
Divorce is actually a great opportunity to sit down, look at the big picture and try to right the ship if things aren’t looking so good. Divorce forces a lot of people to prioritize, which can be a positive thing.
Splitopia: How do couples kick off the negotiations on the right foot?
Burroughs: Start with the low-hanging fruit. It’s different for every couple, but there are always assets that one person wants and the other has no interest in keeping, so start with those things and save the most difficult or contentious items for last.
In negotiating with a soon-to-be ex, I think the key is to look for “win-win” situations.
For example, I advised a couple where the wife had retirement assets but the husband didn’t have any because he had owned his own business. The husband wanted 50 percent of the wife’s retirement assets to use as a down payment for a house. So I said, "Listen, if your goal is to get a house, taking money out of retirement isn’t the best way to do that." Instead, we refinanced the house they had owned together, used the money for the down payment on the new place, and both parties ended up satisfied. It doesn’t need to be a zero sum game.
Splitopia: You’ve helped a lot of couples through this process. What is the biggest regret you hear when it comes to managing finances through a divorce?
Burroughs: The biggest regret I hear is when I get a client after they’ve already gotten divorced and they relied on their attorney to give them financial advice that didn’t work out well. Your attorney has your best interests at heart, but you should realize they aren’t experts in personal finance. Whether you use a financial advisor or not, the people I see who come out in the best shape after divorce are those who took ownership over their own finances.
Splitopia: What's your number one tip for someone hoping to gain more control over personal finances?
Burroughs: If you don’t have a personal financial advisor or a family member who can help you. There are a lot of organizations that can help you gain a base level of knowledge. I recommend Ellevest, an organization focused on empowering women financially. Vanguard also has a good advice and guidance page.
Splitopia: Thanks so much. The key take-away here is that getting your finances in order and getting educating about money helps create a fair and positive divorce settlement, and a more confident, powerful post-divorce life.
Alysia Patterson Mueller is a Brooklyn-based writer whose waking (and non-waking) hours are mostly absorbed by looking after her two-year-old daughter, six-month-old son, and 90-pound black Labrador Retriever. She has a Master's Degree in Journalism from the Medill School at Northwestern University and has worked as an Associated Press reporter. She and her husband are both children of divorce, which makes contributing to Splitopia a meaningful assignment for her.