Friday, May 08, 2015

Adjusting To Divorce - An Overview of Topics

This is the third article, but arguably should have been the first, in a series of articles I wrote last year with regard to my divorce. For me, this was an important part of the process to be able to consider the aspects of the topic in a detached, analytical way. 

It has been a very long time since I posted anything to this blog, and now with the new year, 2015 in full swing, I will provide some detail about what has been going on for me in my financial life. Finances when it comes to divorce are a difficult proposition to be sure.

In this series of articles, I will provide some clear details about what the steps are that I have taken to keep my financial house in order, the steps I've taken that have set me back, and also my ongoing struggles to make sense of all of the various decisions coming for me in the future. I welcome comments and ideas; I am not an expert on these financial topics by any means and I think that it makes a lot of sense to consider carefully what will work for you; your mileage may vary.

The topics that are relevant to divorce when it comes to finance are varied, but I think this is a good sample of my personal considerations around the topic. As I write and complete the various posts, I will update the links ago, but for now consider this list simply a preview of what is coming:

Separation Vs Divorce
Making the Decision and Having the talk
Evening out the inequalities, Separating the assets
Moving out One Year Later
Living Apart, Living Large
Reclaiming Life, Restarting Goals
Dating with Data, Digging for Gold
Comparative Compromise, Coping with Change

The above topics are completely subjective, but in a large way, they characterize the various aspects of my divorce that I would like to discover. I don't expect that things are very novel depending on what kind of separation/divorce you are dealing with...all of them have similar issues and you must work through them each carefully. My sincere hope is that by reading these articles, you'll learn more about yourself and that this will help others' and their relationships.

Saturday, May 02, 2015

From the Archives: An apt time to rebalance - from March 2013

Author's Note: I have recently restarted my blog and I will be posting old posts as a way to show how things have changed in my original thinking versus when I wrote the article. Also, it is a great way to look back. I'll label these posts as "FromTheArchives". This post was originally written in March 2013.

Recently, it was a short week at work with the Good Friday holiday. There were only four working days available. Then to make matters worse, I was coming off a few days of vacation. But all of this lamenting makes it important to reflect on the upside of something that I decided to do recently: rebalance.

At my current position, I am fortunate to have a 401k match and safe harbor contribution that I will continue to cherish as long as I have it. Additionally, I am working to continue to put myself in a better financial situation each month. One major way in which I do this is to aggressively monitor my retirement accounts. I think this is essential because of the downturn I experienced. Of course, I strongly agree that market timing is a loser's game and that long term buy and hold investing of index-based/passive mutual funds with low fees is the best way to invest for the average investor for any medium to long-term goal.

Unfortunately, my work plan does not allow me to invest in such funds within my retirement account and with that kind of free money coming my way, I am not exactly in a position to look a gift horse in the mouth. So, what is there to do? I need to continue to monitor my asset allocation with respect to investment choice: stock, bonds, cash, commodities, real estate etc.

For me, at this point, the smart money is telling me that we cannot expect to have double digit returns in the next series of years (more than 5, less than 20) which is going to be the majority of the time that my money is generating growth for my retirement account. So, if that is the case, I need to strongly consider the amount of growth I expect. Personally, I believe that we'll probably see 7 percent growth for the period I care about (reinvesting dividends).

All that said, I think that the markets are risky for me personally. I want to be feeling good about my accounts, not have the fear that in 3 months I could lose 50% again. So, I am stuck. I don't want to put it into cash because over 50 years, my money will be worth less than the toilet paper it could buy because of the inflationary pressures. I read Bob Brinker and he continues to exclaim that deflation is much more of an issue, but the long term trend is inflation, for sure.

The result for me is that I continue to invest in the accounts that are available to me in my retirement account where I get the match, over and above the match. For the money that is invested in the accounts, I simply try to spread it out over various assets to get some diversification and just accept the fact that the fees are unfortunately going to eat into some of the return. But the far better way to think about it in my view is to be greatful to have something; something's better than nothing.

Thursday, April 30, 2015

Moving Out - One Year Later

This is part one of a multi part series of posts related to the process of divorce. In this post, I describe the process of moving out as part of separation. This article is written as a retrospective though, since it was written during the time of the events, but only recently did I decide that I would publish it.

I moved out a year ago in late March/early April. I actually wrote about this process back then, but decided to hold off on posting about it. In fact, I have not updated this blog since that point. Now, I think the time has come to write about the experience from a financial perspective and with that, here's my first post:

After a very long relationship of nearly 15 years, it is now over. Recognizing it is over is often the most difficult thing to do. And while the emotional stuff was a whole separate set of issues that I won't get into here, the real issues with the financial stuff is where there is definitely some interest and so far, I think that things are going ok.

I am incredibly grateful that we had the financial resources to do this. I consider how difficult it can be for many people to separate due to the issues around money and how expensive the separation process can be. Then I reflect on the fact that it was the simple principles that were followed, day after day for weeks and months and years that led us to the point that when the relationship had finally run its course, that there were few issues with separating. There were enough resources for us to separate and for both of us to be ok.

And the principles were these:
0. From the very beginning of the relationship, I was clear that we should each maintain our own stash of money. I never wanted anyone to be staying with me because of the money. That is just a bad way to be together--to be depending upon another person in such a way that you can never make your own choices. Once that is settled, the other principles can take place.

1. Live below your means, and if you are going to splurge on anything, make sure it is a one-time fixed cost. Do not splurge by continuing to expand your monthly expenses.

2. Save automatically, regularly. For me, it was a matter of saving more than 10% of my salary into my 401k each month. That is the kind of money that you need to be comfortable saving regularly if you want to be in a good place financially.

3. Invest in yourself. Work hard at your profession and make yourself indispensable to the people you work for. Or, find yourself a union so that your income is protected. Either way, develop your income stream and work to protect and secure it once you have it. The income stream is what matters because when you separate, if you have income, you can rebuild a life. If you are without income and have no means to it, then the money will run out fast.

Saturday, April 25, 2015

Separation Versus Divorce

This is part two of a multi part series of posts related to the process of divorce. In the previous post, I mentioned how I had moved out a year ago, but I realize now that this was somewhat putting the cart before the horse. However, the principals there describe some very important aspects of maintaining a healthy financial picture while the relationship is still good. And in many ways, that is where good things start: as discussions while the relationship is healthy.

But, since this is a financial blog more than a personal account, it makes much more sense to orient on those aspects of the process. However, it has been said many times that the most important financial decision you can make is about who you decide to marry. And I agree wholeheartedly. This was not something that I was keenly aware of many years ago when I began the relationship, however. And regret solves nothing. For me this process was an emotional one, and it evolved naturally through drifting apart, separation, moving out, and then finally divorce and grief.

As part of this multi part series, I will inevitably share things that are personal in nature. While I feel that the world is very different than it once was, I still feel like privacy is important. But in this series, I am deliberately choosing to describe some details of my experience, giving up some privacy in an honest hope that this will help someone out there who might be reading.

So, in this post, I will describe how separation is different from divorce. In describing separation, I will provide some context and specifics as it is often the first step in the divorce process, but doesn't necessarily have to be. And while preparing to separate is a very difficult process, the process can be embarked upon in a rational manner, despite the emotions involved. Distinguishing the emotions from the process is not the same as ignoring the obvious emotional implications involved with separation. Finally, I will describe some very specific steps you can take if, after all considerations are taken into account, you decide you want to continue to prepare to separate.

Separation is not Divorce

It is often difficult for people to imagine that a separation is a good idea. Of course, separation does not have to be a long or permanent change. It is something that could be a good change of pace for you. Separation, strictly speaking, is different for everyone. Sometimes, people separate but continue to occupy the same home. In this case, they file legal paperwork indicating separation. In other cases, people physically live in different locations without yet filing paperwork to divorce.

In the strictest terms, separation is temporary, regardless of outcome. Divorce is permanent; it is a severing of the commitment made between two people and represents the final destruction of a relationship that you've built with someone else. There are many people who separate who end up getting back together. In my own personal experience, separation is not to be undertaken lightly however. Before you start to strongly consider separation, consider what you would believe to be the best outcome. If you want a happy marriage, a separation with a short period and finite/strict rules is probably the right strategy over an open-ended long-term separation.

Consider strongly your reasons for separating. Are they emotional? Financial? Or perhaps even physical/external forces? If those forces are enough to cause you to feel the need to separate, will those forces become better with separation? If not, you're not likely solving a problem by separating. Rather, I view separation as a great first step if there are difficulties that seem too enormous to be dealt with in the immediate term and you feel that being together with someone is toxic. Also, separation may be a perfectly reasonable way to deal with some problems which are not relationship-ending in severity, but yet still require some space or distance to sort out. In the latter case, I would strongly consider using the term vacation rather than separation. In this circumstance, you almost certainly intend to stay together.

Get Happy about your Emotions

The first thing that is worth doing and trying is to get happy about your emotions around separation. Separating is an emotional experience. This is completely normal. When you're feeling overwhelmed, and you don't know how to cope, sometimes this is the only way you can do it is to start to consider the possibility that you'll separate. Remember that separating is an emotional experience, and if you are feeling emotions, even very dark ones, you can rejoice in that and be glad. This means that you still have capacity to feel. So get angry, get sad, feel happy and alive. Your emotions are there. They are real and they can be the fire that motivates you to move and make a positive change in your life and in your relationships.

Dealing with the emotions is different for everyone. Consider doing things that clear your mind. For some people this may be meditation or spending time in nature. Personally, I find great peace in my yoga and spiritual practices, but for others it may be attending synagogue or other forms of worship. Do what works for you and spend some time doing things that allow your mind to relax. Give yourself permission to try new things and to make mistakes! Nothing has to be perfect the first time. Don't force yourself to dwell on these difficult problems for long periods without a break. These choices that free your mind allow you to focus and channel your emotional energy toward a positive change.

Once the emotions are in a good place, find one or two trustworthy friends that you can communicate with during this time about your process. If you can find friend(s) that are separate from your significant other, that will be ideal. If it is a friend who is rational and organized, all the better. This will allow you to vent when necessary, but also to ensure that you don't get too far afield with your thinking.

Staying Clear, Preparing for Change

Once you are clear and have a practice that regularly redirects your emotions to a good place, you will be able to evaluate your situation toward separation. This blog is oriented on personal finance, so obviously that is the focus. However, many people make choices financially that are emotional and that is where large amounts of opportunity and money is lost.

Review your income. Do you have a steady job that you think you could continue to work at throughout the divorce? Are you currently in good standing? It is important to realize that your professional reputation could take a hit during this process. Both separation and divorce are extremely stressful and if you are on shaky ground for your income, stabilizing that can often be a good first step in the process. Ensuring that the process is smooth is your best defense against professional impact.

Review your savings. Do you have a large amount of savings? Liquid savings are definitely the best types of assets to have during any kind of personal storm like separation or divorce. They provide a large cash cushion to ensure that unexpected expenses can be handled quickly and easily. Additionally, they avoid issues that are involved with variable prices for non-liquid assets like Real Estate.

Review your obligations. Do you have children, rental properties, aging relatives or other considerations that impact your ability to easily change your living or financial situations? Obviously if that is the case, you will want to consider each of these options and develop one or two contingency plans for each of these obligations to ensure that items are dealt with correctly and quickly.

If one or more of these items are not in a good state, it is not insurmountable. Remember that separation, if you should decide to go that route is a highly individual process which can certainly take time. And what is more, it should not be embarked upon lightly. Discuss your relationship with your significant other regularly. Is it something you want to embark upon? Is it something that you want to execute? Before making any serious decisions, consult that friend or friend(s) who you really trust. Stay tuned for the next article in the series

Tuesday, March 25, 2014

Taxes 2013

It's nearly April 2014--not that you'd know it from the weather that we're having. It is supposed to snow in the next day or so. But when I really consider the amount of work we're doing here, it makes sense to get the taxes done earlier than this.....but I say that every year.

For some reason, despite a refund, I still find myself delaying the tax filing process; I don't know if that will ever change. (And yes, I am one of those people who is giving uncle sam a 'free loan'; I justify this only to say that if I didn't do that, I'd probably never file and then be in jail :) )

When it comes to filing this year, things are getting tricky since I have recently started the process of becoming single. For tax purposes, it wasn't enough time to matter in terms of the dependents etc, but it certainly was enough time for me to realize that I don't want to file a joint return if I am not going to be with the person next year.

Separately, determining who is going to get which amount out of the tax return is also difficult. Thankfully in my case, everything is pretty friendly, but in many cases it is not. While previously I had said that I would go to a professional for filing the taxes, this year I again decided to do it myself since that was much easier than figuring out when/how/where we could all meet and spend several hours filing everything.

So, now it is done, and the last vestiges of 2013 are firmly sent on their way. It is a good thing too, I think. I know that there's a ton going on for other people too, so I am guessing that this is not terribly novel an issue for people, but I am just glad that mine are done! :)