I’m a financial guy. (OK, I’m a chemical engineer, a business executive, and a consultant, too.) But, given my education, my training, and my experience, one would expect me to make great choices in my own personal life. Well, I admit it- I haven’t. Mostly because of emotional ties- which tend to cloud all of our better judgments.
Now, one of my clients is a family law firm, where I provide financial and accounting services. And, I see other people’s divorces up close, personal, and, often, ugly. Where divorcing people do things to get even with one another. (Come on, it’s over, get on with your life!) But, more often than not, where divorcing people make really bad financial decisions.
I have come to understand that one of the early indicators of the financial situation in our country is the divorce rate. When people are fearful of the jobs (financial position), house-poor (the mortgage situation and the inability to sell one’s house keeps more people in marriage- happily or unhappily), and devoid of assets that can finance the divorce, the marriage vows becomes more tenable than when folks are flush and can divorce this major (annoying, frustrating) component of their lives from the equation.
Yet, in every instance, that marital residence is a big issue. It’s more than a financial asset. It’s seen as “home”, where life has unfolded and yielded time and place for sentimental value. Therein lies the problem.
As I stated, I have not made the best choices. I bought my home before I was married. (Don’t get excited. I bought the home with the full blessing of my fiancé- actually, she chose the house and the region, I agreed because it walking distance to a synagogue for which I had high hopes. But, like marriage, things change.) I invested money to remodel the house to add two bedrooms [I had two kids and she had two kids] and an office.
Once we were married and my wife sold her home, she reimbursed me for her share of the home. So, it was, indeed, a joint home. Right before our split, I invested some $ 150K (non-marital funds) to redo the kitchen, porch, and patio. So, given the calculus of divorce, I now owned more of this home than my (soon-to-be) ex did.
But, in reality, the house really needs to be dealt with as an asset. One item that is critical to the negotiations (or courtroom drama) that leads to a legal decree of divorce (which rarely occurs without the ubiquitous PSA- property settlement agreement). Unfortunately, it typically is the largest asset to be adjudicated during the divorce. And, its furnishings, as stated above, are not just the furniture and appliances, but the emotional baggage as well. The latter become overwhelming, when there are children to be affected.
What are those trappings? It’s contiguous to the children’s school (or your work). It’s where your kid’s friends are. Sometimes, it’s been the family manor for generations (this is a tougher one emotionally, but typically easier for the courts to decipher).
But, really, can you afford the house? It’s not just the mortgage payments to consider. There are real estate taxes, utility bills, repairs, maintenance, and landscaping. Even if the house is mortgage-free (for those divorcing later in life)- is that where you want to keep your investment? In an illiquid form, where obtaining cash, should you need it, be difficult at best? Moreover, once you are divorced, there are capital gains to consider. When you are married, you can keep $ 500K of profit from the home tax-free; divorced, there’s only $ 250K. What will that tax bill do to your bottom line?
I admit it. I kept the house. I shouldn’t have. When I divorced, my two pre-marriage children were older – in college or beyond. I did have a 9 year old- who wanted the house desperately. I couldn’t separate myself from his clear and unequivocal emotional attachment. Imagine my feelings when my son announced- when we were reorganizing our firm to insure success for the future, four years later- that he no longer cares if we keep the house. When my financial assets were all devoted to this corporate reorganization? When I was house-poor?
It’s hard to predict the future. So, keep your decisions grounded in reality- use real financial considerations.
You bring up many valid points. The main point, keep emotions out of it and put finances first, makes perfect sense. It’s up to parents to do their best to get along for the sake of the kids and to make decisions that benefit everyone. It’s tough when emotions run high but in the end, keeping a level head pays off.
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Got that down pat, Lisa. Thanks for the great synopsis…
Roy
Wow, unbelievable perspective and content. Roy – this is just incredible insight into issues that I’ve never even considered (thankfully). Regardless, thanks for this invaluable content!
Tor Constantino recently posted..Black Friday Blues: Wedded Blisster Series – Episode 11
Thanks for your comments, Tor.
I just see these folks going through what I went through- and try to help them steer the canoe away from the shoals…
Roy
Hi Roy,
This post was a hard one for me to read because of my own personal bad decisions during the worst part of our nasty divorce. I think I have moved forward in my life and then I remember how poor I have become based on some bad decisions.
You are right in suggesting that we stay grounded in our decisions but I can tell you personally that it is very hard to do sometimes. Thanks for sharing your story.
Cindy
Cindy Murphy recently posted..It’s Thanksgiving Week l What Are You Thankful For?
Thanks for the cogent addition to the discussion, Cindy…
My heart feels for you- but knows that the pages have turned and the next chapters are proceeding…
Roy
That’s enough to make my head spin, Roy. Sorry for your difficulties with regards to the divorce.
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My difficulties are part of the ancient past, thankfully.
I am more worried about the folks I see going through the divorce spincycle, hoping to help them stay high (not to become distraught) and dry (not soaked by the home costs)…
Roy
That’s great advice as usual, Roy, yet I can’t imagine many would do it differently if in the same shoes. There is so much emotion in divorce, for parents and children, that we want to try to make our kids lives as steady as possible through turbulent times. And even if your son could care less about the house four years later, I bet your decision at that time helped your son, whether you knew it or not.
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Thanks, Suerae.
I try to counsel those that are buffeted by the divorce storms to be more realistic and less attached to various physical aspects. But, advice requires a listening ear and heart…
Roy
I guess there are some advantages in never rooting. Having never lived in any house for longer than 5 years until the current (6), I have never gotten attached. And my marriage has always taken preference over anything financial. I think I must be weird. My mother thinks so anyway. Roy, you do point out some valuable information. When I decided things mattered less than people, many things changed in my life. And when things start to be more important than people, I just chose to get rid of the things and keep the people.
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We can always decide (or should?????) that things matter more than people.
However, with the instability of divorce, many folks think that their people will be more stable around familiar things…. Therein begins the problem…
Roy
Huh? Is it not that people matter more than things? And that is where the problem arises? As I said I have no understanding of this situation.
Roberta recently posted..Stuck believing “Everyone says”
I am not sure that we are talking about the same concept. People matter more than things (one would hope in everyone’s mind). But, that is not the same thing that many parents (typically, moms) think that changing physical AND emotional circumstances at the same time tends to be more traumatic. As such, they decide that keeping everything other than the ONE (or two) items that are bound to change the same renders the situation more tenable for their children…
Roy
Ah, yes…if we could simply take the emotional out of the equation when what is more called for is the logical and rational. I recently coached a client who, as part of her growth, was leaving a shared home. With the house on the market, she felt bound to stay put because a furnished home “sells” better than a vacant one. Of course, there were layers of emotional concerns and stories to peel back before we got to me saying, “wait, so what I’m hearing is that what is between you having peace of mind and moving forward is furniture?” With all the clutter moved aside, she saw how she could choose to be happy now by going ahead with her move and filling the space with short term rental pieces until the house sold. Sometimes we need an objective view from a financial advisor, tax planner or coach so we have the option of making a logically motivated choice over an emotional one…and sometimes we just need to honor the feelings and know that you can’t put a price on doing what felt right at the time.
Tambre Leighn/coaching by tambre recently posted..i-Thrive! Full Circle
Absolutely! Tambre these are the issues that need to be considered. And, it should be a function of the family lawyer to provide such advice- the probelm is also that it’s not well received….
Therein lies the dilemna…
Roy
Fortunately when I got divorced at the age of 32 I didn’t have a home yet. But I had to deal with heavy emotional and physical abuse which at the time didn’t know I should have told somebody about. Despite that I came out of it much stronger and confident.
I know others that have gone through some pretty messy divorces and I just don’t know how they sleep at night when they are going through it. It seems so pointless and so much energy for what? I think you story Roy is a good one to pass along as some good advice and tips that could be considered before they get caught up with unrealistic financial demands.
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Lynn:
It’s our advice that helps the next ones through the gauntlet. That’s called paying it forward or returning the favor…
Roy