KEEPING STEP WITH FINANCIALLY SAFEGUARDING YOUR CHILDREN AFTER DIVORCE
By: Lisa J. Peck | Posted: 17th December 2009
No doubt you hoped your existence would be "happily ever after" when you said, "I do." Let's be honest, no one pictures sitting across from a husband or wife during divorce proceedings and thinking "I never noticed those nose hairs when he flares his nostrils in anger." or "Wow! She spits when she says her "S" words. Somebody get a towel."
Once you've faced the reality of the end of that particular dream, you will realize that now is the time to look forward: to believe this came along for a good reason…to teach you something, or to guide you on another path, to nudge you out of that safe cocoon and into a wilder, richer adventure. Your whole future is open, if that's how you choose to look at it. Once again, you are free in so many ways that you weren't when you were part of a "couple." Take advantage of it. Have fun. Learn from your past, move on and LIVE.
When you are preparing for your new life, you'll inevitably ask yourself some hard questions, one of which will be: Will my children and I be able to afford our future? Just as you prepared yourself for divorce by learning to pay attention to finances and ensure the security of you and your children, your goal now that the "papers are signed" should be to continue diligently focusing on your resources and be prepared to research and study what measures to take if something goes wrong.
Right After the Divorce is Final
This is the time to proceed with caution. Maybe your ex took a lot of possessions from the house and you're tempted to go out and buy new items to replace them. Resist this urge. Take it slow and easy so you don't get in over your head. This is a sensitive time.
Your finances, even if you're getting child support and/or alimony, and if you have a good job, are bound to falter for a while. Issues may come up unexpectedly—new insurance and medical costs, or you may be paying rent or mortgage for the first time. The legal fees from the divorce could be bogging you down and forcing you to tighten your budget considerably.
Keep up those itemized lists of your expenses that you started during the divorce. Here are some ideas of what you should track:
• List where every dime is going, especially cash. Paper money has a tendency to disappear.
• Discover where you can cut costs and where you can spend a little.
• Know what months will be tight and which ones will be easier.
• Budget in advance for things like auto insurance and taxes.
• Use an accountant or a good book on finances for advice on how to set up and maintain a budget.
• This process will take at least a year. Remember that some years will be more expensive than others; for instance, you could some day be faced with your child's senior year in high school which would involve a class ring, rental of the cap and gown, graduation pictures, the senior breakfast, the senior prom etc. Don't let events like this blindside you.
• Continue to contribute to your 401K, savings account, or individual retirement plan, even if it's only for a small amount.
Keep in mind that there will be many things that change:
• You'll probably buy a different amount of food at the grocery store.
• Where you end up living could account for a huge chunk of your resources. Even a modest apartment could mean a third of your income. If you are a homeowner, not only the mortgage but also the upkeep may stretch your budget.
• You may go to work for the first time or start a new job.
• The money you used to spend on the holidays will likely change (you probably won't be buying those earrings or new golf clubs for the ex).
• If you have custody of the children, you may be paying for childcare you didn't have as an expense before the divorce.
• Your income will likely be different.
• You might lose financial support from generous ex in-laws.
• You'll probably have to hire babysitters more often.
• Not to be stereotypical, but if you're a woman, you may find yourself hiring someone to do the yard work or you may now take your car to the shop. If you're a man, you might eat out more, or hire someone to do your laundry and ironing.
Credit Issues
If you treat your financial life with care after your divorce, you may end up better off than before, both financially and psychologically. Watch out for the desire to buy unnecessary items in order to feel better. It takes time to adjust to your new financial status after a divorce, and you don't want to ruin your credit or fall short when the bills come due. Be responsible: take care of important issues like life insurance, medical insurance, car insurance and home or renter's insurance. Build up your money accounts, even if it's just a little at a time, so that you have emergency padding.
Make sure your credit is now in your name only, or establish it for the first time if you need to. If your credit has suffered along with your marriage, there's help available for that with reputable credit repair law firms. Order your credit reports and review them carefully. Be sure to report any mistakes to the credit bureaus. Most of all make certain your ex's name stays off your credit reports. You can do this by ordering your credit reports every six months.
Check to see if your state supports the new "Security Freeze" system. Security freeze gives you the opportunity to lock access to your credit file against anyone trying to open up a new account or to get new credit in his or her name. When a potential creditor or seller of services tries to check your credit file, the freeze prevents them. When you are applying for credit, you can lift the freeze temporarily using a PIN.
It sometimes helps to have a couple of credit cards with balances available for "just in case" purposes. Since we never know what the future will bring, especially when we're raising children, those available balances may one day come in handy. But need I say to beware? Credit card use is insidious and extremely easy to lose control of. We've all probably learned this--sometimes the hard way. So, use caution with credit cards or any easy money.
Child Support
In your divorce, child support was probably one of the major issues after who was awarded custody. The parent with main physical custody is generally the parent entitled to child support. The agreement decided upon in negotiations and/or mediation, or the court decision concerning how much your child will receive from the person paying child support, will impact the financial well-being of you and your children for many years to come. Because of its importance and the many possible complications, I've provided an article solely about child support at www.stopmarryingmistakes.com
Retirement Plans
If you didn't cover retirement plans in your divorce proceedings, now's the time to handle this subject. Keep in mind that you are doing this for your child/children. Sometimes it's hard to go after something that you know is going to make your ex angry. But grit your teeth and follow your attorney's advice, especially if your ex spouse is the only party with a retirement plan. The plan was set up to make the golden years easier for you both, so it isn't right to simply let him or her take the entire thing. You deserve a portion of that retirement plan. Go with your instincts. This money will make life easier for you all.
Why a retirement plan should be shared
If you're reading this and you're the one who's contributed to a retirement plan, you're probably seeing red about now. It's your money, you earned it, and the very thought of having to give some of it to an ex you won't even be living with come retirement time, is pretty galling. Yep. But keep in mind that the money from your plan will directly and indirectly benefit your children. Almost every state in America has thrown retirement plans into the marital asset basket, and as such, they must be divvied up. If your ex spouse, for instance, has been a stay-at-home wife and mother for thirty years, you may have to say bye-bye to a respectable chunk of your retirement plan.
The plan or cash?
Sometimes what an ex spouse might really want and need is ready money—for instance, if said ex spouse is the one moving out of the home, starting a job, caring for the children. Money right now might be what this person really needs, and you may be able to negotiate. Your ex may be willing to give up claim on any part of your retirement plan if you'd be willing to pay cash now. This might work out to your benefit; it really does depend on the size of your retirement plan and how much cash you can come up with. Keep in mind that your money will benefit your children more now than it will if you wait for retirement and they are likely grown.
The lowdown on qualified domestic relations orders
A Qualified Domestic Relations Order or QDRO, is a legal order subsequent to a divorce or legal separation that splits and changes ownership of a retirement plan to give the divorced spouse their share of the asset or pension plan. QDROs may grant ownership in the participant's (employee's) pension plan to an alternate payee, who must be a spouse, former spouse, child or other dependent of the participant. QDROs must first be entered by the State domestic relations court and then reviewed by the plan administrator for compliance with ERISA or other applicable law and the terms of the plan.
As you can see, it isn't always a spouse or ex spouse who gets a portion of your retirement plan. It can also be your child or children. There are some things to figure out, calculate, and be wary of when using one of these orders. Before you decide on one of these plans, you should research it thoroughly and perhaps consult an attorney.
If your ex spouse is bitter over losing part of his or her retirement plan, you might consider another avenue. There are ways you can give up any claim to the plan if the ex will give you something else of equal or higher value, such as the house, or money in a savings account. To determine what would be of equal or higher value, the retirement plan must first be evaluated.
Points to Ponder
At first you'll probably be too busy to dwell on much of anything after your divorce. You might still find time to recap a thing or two as you're falling asleep; but your job, car repairs, preparing food, chauffeuring your children and managing your money may not leave much energy for thought and reflection.
Maybe there will come a day when the bills are paid, the children are playing, and you have a few moments to catch your breath. This will be a good time to take stock. Ask yourself:
• Have I done everything I can to make sure my children's financial future is taken care of?
• Am I afraid of future money matters, or am I confident?
• Are my children in need of anything materially?
• Am I prepared for financial emergencies? Have I taken care of every contingency that I can foresee?
• Are we eating well?
• Are we exercising? Taking care of our bodies and keeping up with our healthcare?
• Do I have a contingency plan in case something unforeseen happens financially?
• Is my will in order? Have I covered things like:
* How any money I have will be divided.
* Do I want any assets or money to go to my ex?
* Who will take care of the children if something happens to me?
* How will the children be provided for?
* Who do I want to carry out my wishes? A relative? Lawyer?
Be sure to put your notarized and signed will in a secure place like a safe deposit box. Leave a copy along with instructions with your attorney or someone you trust.
Suggestions that can help
Whatever you're feeling after your divorce, know that it's probably normal. Here's a short list of things you can start doing to make the adjustment period more manageable:
• Counseling. How can counseling save you money? Consider it preventative care. Paying for help up front, especially after a divorce, may deliver dividends in the form of mental health. If you do take this aspect of your future on, treat it like any other expenditure. If counseling isn't affordable, practical, or possible, what about a divorce support group? Therapists have lists of these organizations, and their numbers can also be found in the phonebook. Friends or co-workers may know of good therapists. Your doctor, too, will probably have access to this information. Another option is to find a life coach. What is the difference between a life coach and a therapist? To put it simply, a therapist may attach the majority of emphasis on the past, where a life coach focuses mainly on present issues and how to deal with them. To read more about life coaches, check out the article Stepping up to a Better Life With a Coach on www.stopmarryingmistakes.com Some life coaches are able to assist you to create new ways to earn money and/or to upgrade your present job, business or talents.
• If you are struggling financially because your job doesn't pay enough, work on your résumé. Make sure it's up-to-date with all your great accomplishments listed in black and white. The Internet is a good source of "how-to" tips on updating your résumé. And if you've stayed at home the last umpteen years, don't forget that a lot of what you did there can be transferred into marketable skills. Your management of time, for instance, your money-saving techniques, etc.
• Goals are great things. Small ones at first. A daily goal of say, reducing the electric bill by turning unused lights off. Later, when you feel stronger, make grander goals. Weekly, monthly, then jump into the five and ten-year goals. It can be fun and uplifting. Where do you see yourself? Where do you want to be? Financially secure? Not worrying about money? Doing what with your work life…your social life?
• Many divorced parents have found that opening savings accounts for each of their children works wonders. Both parents are more willing to contribute extra money into an account governed by the child.
• Realize that life is now about you, your children and your wishes. What have you always wanted to do that you never did? Now might be the time to start saving money to make the dreams you and your children have come true.
The subject of protecting your children financially has been divided into two articles in the Stop Marrying Mistakes website. The companion article to this one is Stepping up to Protect Your Children Financially Before the Papers Are Signed. Also, check out Stepping Into the World of Child Support for a more thorough study of how to protect your children financially in the years to come. For a preview of the valuable information contained in the Thriving After Divorce Audio Program also available at: Stop Marrying Mistakes click on Media/Press on the home page. The information in this article and on the Stop Marrying Mistakes website is not complete nor should it take the place of hiring an accountant or an attorney. But it can give you an idea of the type of actions you can take to protect yourself and your children when it comes to money.
Pat yourself on the back. You realized your marriage wasn't working for you, and you did something proactive about it. Yes, finances were a worry when you first started considering divorce, but you made it through, and now you're coasting on the downhill slope. You're on the next exciting journey through the rest of your life. Congratulations.
21 free tips to Stop Marrying Mistakes. Lisa J. Peck invites you to enjoy and celebrate your own healthy relationship by stepping it up in every area of your life. For help on empowering yourself and recovering from divorce: visit http://www.stopmarryingmistakes.com
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