Future Financial Planning After Your Divorce 5 Tips

Let’s Talk About The ‘M’ Word

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October 6, 2015

Before I begin, this is NOT a sponsored post.

So, let’s talk about the ‘M’ word. No one wants to, right? Talking about money in any way, shape or form tends to cause anxiety in most of us. It does in me, I know that. We’re worried we don’t have enough, what we do have is somehow already spent and we won’t have enough in the future.

Divorce certainly feeds into these fears and anxieties. It’s a process of division and losses. It’s a numbers game and many of us don’t like working with numbers…ahem…who, me? That said, I like to think I’ve learned and improved some of my bad habits during and after divorce. For example, I learned that I wouldn’t live in poverty after all. I learned that I could (sort of) live within a budget (something I wasn’t interested in doing before) out of necessity. I learned that simple tricks can save a bundle of cash over time. I learned that I wasn’t as bad with numbers as I originally thought.

I wrote about simple budgeting during divorce, here. Plus, note that I’ve written a whole chapter on money management during divorce in the book. I lay out a sample budget and ways to cut back spending and live on less. Here’s the thing; it’s not all bad. It’s not a terrible sacrifice to learn to manage our money and to discuss the ‘M’ word. Many of us were taught that it’s uncouth to discuss our personal financial issues but I beg to differ on that. Silence breeds ignorance in many topics of life but especially where our money is concerned.

So, we’ve got our day to day finances under control but what about our future? Typically, as a married person you plan for your financial future together but once we’re separated/divorced, we’re responsible for our own financial future. To be fair, at initial separation we’re dealing with highly emotional issues and it’s difficult to think about 20 years from now, let alone next week. Eventually though, we have to.

That’s where I kind of dropped the ball. I had RSP’s, (the equivalent of a 401K in the U.S.). These didn’t help me with my everyday living though, as there is a huge price to pay in taxes if touched before their time. So, there they sat in two accounts during my divorce and for many years after my divorce.

That was my mistake.

I don’t want you to make the same one.

I ignored my RSP’s. I thought that’s what I was supposed to do. Let them sit there and earn a few pennies every year. The point was it would be there when I ‘retire’. So, just leave it be, right? Wrong. There is no good reason to ignore your RSP account. You should be looking at your monthly statements, not just glancing at them and filing them away like I did. Really take a good look at them and see where you could improve your account. What are you paying your adviser annually? Are they paid based on fees or on percentage of returns?

Do you have mutual funds? Are they earning you any returns on your account or are they simply earning your adviser returns? This can be a problem with financial advisers affiliated with your bank. That’s what was happening on my account but I was ignorant to this glitch. In hindsight, I should have sought a second opinion on my statements to determine if my money could be earning improved returns. I didn’t do this for a few reasons. I didn’t have the confidence and I didn’t make my money management a priority. I didn’t know where to take my statements or who to turn to.

So, based on my mistakes here’s 5 tips to better manage your financial future;

1 Once your divorce is settled, take your RSP account statement to two or three reputable investing companies outside of a national bank. Make appointments. Meet the people there. I emphasize meeting them in person for the same reason you meet lawyers in person before choosing one. You have to rely on your instincts when it comes to choosing professionals and an investment adviser is no different. Once they review your statements they can ascertain if your account is earning you decent returns and if it isn’t they can recommend an improved portfolio. Most investors from reputable companies will give you a free review.

2 Don’t stick to your investment adviser just because they’ve always taken care of your account. That’s the mistake I made. Were they actually looking out for my best interests? Absolutely NOT. I remember feeling uneasy about one of them but I ignored my instincts. I didn’t know how nor take the time to make the changes that were necessary to take care of my financial future. There was comfort in the status quo, a false sense of security.

3 In your divorce settlement, be careful of making any ‘retirement savings deals’ in lieu of spousal or alimony support. If you require support to live on and bridge the financial gap that comes with being an economically dependent spouse (the purpose of Spousal and Alimony support), RSP’s aren’t going to benefit you for day to day expenses. You won’t be able to access the money without the tax penalty meanwhile, your ex will avoid any tax costs. How is this to your advantage? It isn’t. My lawyer recommended that as an option to my ex without discussing it with me first. This was early in my divorce. I ended up getting a new lawyer because obviously, she wasn’t exactly looking out for my best financial interests.

4 It’s never too late to start an RSP or 401k. Save a little money every month until you have enough to finally deposit into RSP account. The primary purpose of the account being to waive income tax on that money at the end of the tax year. Once you have an account started, your money should ‘work’ for you and earn you returns. In other words, it will build and grow over time until your retirement.

5 If you don’t see any growth on your account, get that second opinion. There is no reason your account should be stagnant. A balanced portfolio should reflect some earnings. Mine was stagnant while my adviser told me it was safe…it was really dead and I’ve ended up losing years of returns on that money that I could have otherwise been accruing.

6 Consolidate RSP accounts if you have more than one. Why have two separate accounts? It only adds to the confusion and effort you require to keep track of funds and maintain some control over your money. I had two accounts in my name during the marriage and I’m not sure why. Both were (are) spousal RSP’s.

Bonus Tip: If your RSP or 401K is a Spousal account and you have been awarded it in the divorce settlement, then have the Spousal title on the account changed to a regular RSP or 401K. This will avoid any problems transferring your account if you decide to at a later date. You will need to provide ‘proof’ that your spouse is no longer a contributor to your account and that you are in fact, divorced and it takes a few weeks to complete.

Interestingly, I only recently learned that my ex-husband stopped making deposits into my spousal RSP’s five years before we separated. I’m curious as to why he stopped and where did the money he would normally contribute end up going? The purpose of the spousal RSP’s is to reduce income tax and prepare a couple for the future financial stability. So, why did my ex stop contributions and better question why did I not even know? Another marital mystery unsolved.

Learn from my mistakes, Escapees and take the ‘M’ word by the horns. Learn. Read. Pay attention. Taking action will surely allow for improved returns, and that means a more stable financial future. Don’t coast or sit on RSP’s that are not earning you anything. There’s no need to put your faith in one adviser without second opinions nor to remain loyal to your ex’s advisers after divorce. You have every right to move and change investment agents. Also? You don’t have to be The Wolf of Wall Street to take some initiative and ensure your RSP account is a balanced portfolio earning you some returns without high risk.

image source: creative commons…however this lady resembles actress

So, talking about the ‘M’ word isn’t so terrible. Talking about your money and future financial picture will improve your confidence and allow you to start being proactive. Talk with family and friends you respect. Ask them what their retirement planning entails. How do they manage their accounts and are they satisfied with their advisers?

This will decrease anxiety because once we begin taking care of our financial future, we know we’re going to be okay. Spend a little time managing and less time worrying. You’ll reap the benefits in feeling secure and looking forward to the future instead of dreading it.

[ctt title=”Your future\’s so bright, ya gotta wear shades baby!” tweet=”[ctt title=”Your future\’s so bright, ya gotta wear shades baby!” tweet=”Your future’s so bright, ya gotta wear shades baby! @lisalisathom http://ctt.ec/bYUgf+” coverup=”bYUgf”]

How do you feel talking about the ‘M’ word? Any tips you can share on long term financial planning?

401K/budget/divorce/RSP/tips

31 Comments

Clint
October 12, 2015 at 5:01 pm
this is a very interesting topic i love it seems to me everyone now a days in this industry are just sales people this goes for mortgage brokers as well you’re right to learn this for yourselves i was actually doing some research and you can do this and its a small investment and its riskless. i don’t know if we can do it here in Canada i know the US markets you can because they have the technology to do it. its making the spread between short and long term interest rates basically since the central banks crashed the price of money. this is what i was researching recently and its really interesting
the fed funds rate is at 0.25% and $5,000,000 per contract you have to put a little bit of margin but this is a fixed rate so what would you do if you have $5,000,0000 and you know that in the future that amount of money will be worthless.

its interesting i have some great data studying different markets there are certain correlations.
- lisa
  October 12, 2015 at 9:35 pm
  Hi Clint, thanks for sharing. $5 mill is a lot of money though so many wouldn’t have that kind of cash to invest. Hope you’re doing well!
  - Clint
    October 21, 2015 at 5:34 pm
    actually TFSA or Tax free savings is way better than RSP and all the capital gains are tax free
Mark
October 12, 2015 at 4:56 pm
Great advice Lisa!

And personally, I would say no matter what your current status happens
to be!

whether you’re married or single, you definitely need a pretty good understanding, if nothing else, on the basics of the “M” word!LOL!

Seeing how, it affects us throughout our entire lives!One way or the other!No matter which particular sex we happen to be or what our current marital status is!

But you have certainly provided five extremely practical tips and suggestions!

And they will certainly help anybody move forward and avoid certain, all too common pitfalls!
- lisa
  October 12, 2015 at 9:31 pm
  Hi Mark, I agree that while married we need to take a more proactive role when it comes to our finances. that was my downfall. Thanks for stopping by and sharing your view!
Jane Thrive
October 12, 2015 at 12:13 pm
Great advice, Lisa! It’s never too late to think about the M word and what it means for your present and future. Good lord, I remember the fear that I would lose my home on top of my exploded family, but it all worked out. Thank goodness. <3
- lisa
  October 12, 2015 at 9:30 pm
  Hi Jane, Yes, it’s never too late. That must have been so scary for you at the time. Thank goodness it’s all worked out well. We sure learn about security, loss and preparing for the future when we get divorced. Thanks, Jane!
Liv
October 10, 2015 at 5:14 pm
One of the first open discussions I had with my husband. Before I told him I loved him. I had to know how he felt about handling money first. Because I got it so wrong the first time.
- lisa
  October 10, 2015 at 8:47 pm
  Excellent advice, Liv! Perfect.
Marcia @ Menopausal Mother
October 9, 2015 at 8:07 pm
Great advice, Lisa! I think there comes a time when we all learn from our financial mistakes. As long as it happens early enough that we’re able to correct the situation, then it all works out well in the end.
- lisa
  October 10, 2015 at 3:18 pm
  Thanks, Marcia! Absolutely agree, it’s never too late to make a correction. No need to fear our bank account, numbers and accountants…grab the $ by the horns 🙂
Marie
October 9, 2015 at 1:17 am
I think your post can help many Lisa. May you be blessed for sharing what you’ve learnt over the years.
We never had mutual account, so it made things easier.
Love. xoxo
- lisa
  October 9, 2015 at 3:35 pm
  Thank you, Marie! I hope I’m helping others via my own mistakes 🙂 That’s good that you each had your own bank accounts. Always a good idea to have an account in your name while married. Again…my mistakes…
My Inner Chick
October 8, 2015 at 3:04 pm
Lisa,
you are a wealth of knowledge, my dear.
I, for one, find you amazing. xx
- lisa
  October 8, 2015 at 10:04 pm
  My knowledge comes from my mistakes, Ha! 😀 Thank you Kim, xoxo
Charlotte
October 8, 2015 at 12:10 pm
I have a friend going through divorce now (actually, she is officially divorced as of yesterday) and we’re having a bit of a party for her tomorrow night. I’m going to forward this to her because I know that she worries constantly about finances, especially since she is now the sole breadwinner and mother of two little boys. I didn’t know about half of this stuff (well, more than that actually), and it’s useful to have you lay it all out like this. You are doing such a great service to so many readers, Lisa. Thank you 🙂 XOXO
- lisa
  October 8, 2015 at 10:03 pm
  Thank you, Charlotte! I hope this helps your friend realize it’s not as scary as it seems LOL. That’s so nice that you’re going out with her to celebrate. Putting a positive spin on divorce is always a great idea!Thanks for sharing this with her, Charlotte xoxo
Donna Merrill
October 8, 2015 at 7:32 am
Hi Lisa,

So glad you have brought up this topic. What got me is that you found out that your ex didn’t pay into the 401K for 5 years prior to divorce hmmm…

This is why we all need to sit down with our partners and discuss where money is going before the divorce. With couples, one usually takes care of that and the other doesn’t. Pretty common. But we have to take responsibility when things are bright and happy because you just never know.

When I was divorced, I traded in full custody for my daughter for the house, business, cars and so on. I just wanted her to be safe with me and gave him everything. I’m sure glad I did. It made me a much stronger person.

-Donna
- lisa
  October 8, 2015 at 4:25 pm
  Yes, you’re right Donna. It’s important to be open about it while married. I only recently found out this little nugget of information. I wracked my brain trying to remember if it was a joint decision or why he may have decided to stop contributing and honestly? I’m coming up blank. Oh, well that’s in the past and now moving forward, I hope my accounts will be a little more active and earn some returns.
  
  It’s a shame you had to choose between your daughter and marital assets. My goodness, you made the right choice of course but it’s hardly fair for a woman to end up with zero marital value. It’s always interesting to hear your experiences Donna. Thanks for sharing!
Kelly Hashway
October 7, 2015 at 6:32 pm
Great tips. I can imagine how scary this could be. Finances always make me edgy.
- lisa
  October 8, 2015 at 4:22 pm
  Me, too Kelly although a little less now that I’ve faced some of my fears. Thanks for stopping by! 🙂
Jess @UsedYorkCity
October 7, 2015 at 9:38 am
Totally agree, it’s better to have clear, upfront conversations about this stuff than be shocked later! Much like religion and sex, money can be a taboo thing to talk about, but it really shouldn’t have to be!
- lisa
  October 7, 2015 at 4:02 pm
  Taboo. Exactly, Jess. You’re right that we should be more open about these topics as they would reduce the surprise factor… 🙂
Harleena Singh
October 6, 2015 at 10:33 pm
Hi Lisa,

Wonderful post indeed 🙂

Yes, one can imagine the financial struggles a divorcee goes through and how tough it can be at times to get the money out from your ex as not all of them are ready and willing.

But you are right, if one’s in such a situation, we’ve got to remain alert and knowledgeable about our rights and fight for them. I guess in most of the cases, the person become emotional and money is the last thing on their minds, till it really falls short. Your wonderful tips would surely help.

Thanks for sharing. Have a nice week ahead 🙂
- lisa
  October 7, 2015 at 8:49 am
  Exactly true, Harleena. The emotions can get in the way of planning for the future. It’s not so hard to do though, once we get a little confidence and spend a bit of time comparing and shopping for the best advice (like the best pair of shoes 😉 )
Balroop Singh
October 6, 2015 at 8:22 pm
Hi Lisa,

This is a very powerful post. Your experiences with money are quite scary for me but the way you have put all of them together to help others is fantastic.

You are right, emotional moments and that too when one is losing a home that was built on lovely dreams drowns the factual details and difficulties, which wait to swallow them.

This post can be very helpful in guiding those who make such financial mistakes. You are so brave dear friend. Circumstances have made you so resilient. Stay blessed and happy.
- lisa
  October 7, 2015 at 8:47 am
  Thank you, Balroop 🙂 I’m certainly more proactive when it comes to my money than I ever was while married. That’s a huge bonus, right? It was a little scary at first, especially with lawyer bills to contend with but nothing too unique as most women face similar challenges during divorce. It does get BETTER though.
Corina Ramos
October 6, 2015 at 11:55 am
Hi Lisa.

I remember the financial struggles when I left my ex. I didn’t get one thin dime from him let alone any split in savings…he never held down a job long enough.

Thank you for sharing your experiene and tips with us. I’m passing this on in hopes it’ll reach other ladies who could use your advice.

Hope you’re having a great day!
Cori
- lisa
  October 7, 2015 at 8:45 am
  Hi Cori, That must have been really tough time for you! Thank you so much for sharing this post with others. I appreciate that. 🙂
Tamara
October 6, 2015 at 10:07 am
What’s really interesting to me, is how hard it can be to talk about money even while happily married. Or before! Cassidy and I never did. Not before and not in the beginning.
We do now and it’s a HUGE difference, but we have a long way to go. I shudder to think about life’s messes and how we’d be equipped to handle them.
- lisa
  October 7, 2015 at 8:44 am
  You’re right, Tamara and make a great point. Money is a difficult topic during marriage as well. I think divorce forces us to think about it in a different way and with anxiety. Sounds like you and your hubby are opening up about the topic and I’m sure that takes away some of the tension surrounding it.