EP 214: Top 10 Must-Follow Divorce Tips – Part 2
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In this episode, we’re continuing the series on my top 10 divorce tips, and I want to just jump in to the next ones. Tip number four, so if you didn’t hear the previous episode, I gave tips one through three. Number four is keep the big picture in mind. If you know or ever heard of Yogi Berra, he has a funny quote that I like that says, “If you don’t know where you’re going, you’re going to end up someplace else.” And the point is with keeping the big picture in mind is what do you want? One of the questions that I will ask everyone if they don’t have a clear answer for is what do you want out of life? What do you want out of the divorce process? Clearly things are going to be changing during the divorce process, and given that, you need to have some goals, some things that you’re aiming for.
Start envisioning what your future looks like, and what I encourage is I encourage writing down your priorities. This is an exercise I go through every week, and I do it for me personally, but this is something you should be thinking about and thinking hard about, and it is, I usually ask two questions for if you’re going through divorce. One is what are the three most important things that matter for you in the future? And secondly is what are your three most important goals for your divorce? The point is this, is if you think about your future and think about what your life may look like or what you really want to get out of life, you might not have concrete answers. Sometimes it might be a well, I want to be able to support my kid until they reach this age or get off to college, or maybe I want to start a new career, or it may be I want to pay off some debt and start fresh. There’s any number of potential goals you may have. It may be I want to move. I’ve talked to a lot of people who say, well, I’ve been thinking about where I’ve lived isn’t the place I necessarily want to be. I’ve been thinking about moving to some other place.
Whatever that is, it’s worth writing down your goals and ultimately then sharing them with the people who are here to help you. Because one of the things that we can do, your attorney can do, you can do, is really guide yourself and guide the divorce process so that people are working towards the goals that matter most for you. And oftentimes in the divorce process, you have options, and one of the most valuable things that I think that I do and that an attorney can help you with is, hey, you have this pool of assets, but there may be five different ways to split them up that gets you to the same place, but maybe way number four is the one that actually gets you to the goals that you’re aiming for. But if you don’t know what those goals are and you’re not able to share them, it’s hard for all of us collectively to get you on the right path.
The next tip, which is tip number five, is one of my most important and one of my favorite tips when it comes to the financial side of things, and that is understand your expenses. I have a line, so I’ve written I guess three books at this point. One of my first books is more general financial advisor related, but I have a line in there which is one of my favorite lines. It says expenses are guaranteed, making money and investment and income is not. And so what I mean by that is that you have a fixed base of expenses. Some people call it a monthly net, monthly nut, some say it’s just your expenses, but it’s your housing, your car, your food, your activities, your clothes, just the normal way that you live your life. And most people don’t sit down to understand, well how much do I need to cover my expenses each month?
Now, I do know some of you who know offhand, and that you know that every month you spend $8,000 or you spend $24,000 or whatever the case is, and you kind of have a pretty good idea, but most people have no idea how much they spend every month, and it’s usually a shock to once you sit down and figure out what your expenses are. And so one of the things I really encourage you to do is to understand your expenses and your expense picture as you go through the divorce process and figure out what areas you might be able to cut as you go down later. Now if you complete a financial affidavit, in many states the financial affidavit or statement and net worth statement has and requires some very, very detailed expense information. And while it’s admittedly a pain and perhaps kind of overwhelming to fill out that information, on the plus side, that information is very helpful when it comes to planning your future, because you’ll have a baseline of like, hey, here are all the things that I’ve been spending on. Do these expenses make sense? Can I continue this lifestyle afterwards, or most likely, for most people that I talk to and work with is, is that you’ll have to make some adjustments.
But that’s okay. At least you know. And so one of the next steps I really encourage everyone to do is an exercise also that I personally do, even though I’m not in the middle of a divorce, but I do almost every month, is really understand all of my expenses. In my book Divorcing Your Money, How to Avoid Costly Divorce Mistakes, I have a great checklist of expenses that you should go through, everything from housing expenses, food, clothing, entertainment, insurance, medical expenses, transportation, debt service expenses, be it credit cards or otherwise, if you have education or child related expenses. Kind of list out the things that you should be thinking about. But like everything, when it comes to expenses, you don’t always have to over complicate it. One of the things I do, and I’ve said this before, is I always just start with a blank sheet of paper.
I carry around stacks of blank printer paper, because that’s what works for me. And I also carry around a notebook that has blank paper in it, and I just start listing things out and I say, hey, that expense is about $250 a month, that Netflix is $12 a month, this is whatever. And I just start adding it out on a monthly basis and then start figuring out, oh hey, I’ve got to get my car serviced once a year, which costs X amount. I had some maintenance issues on my car this year with some tire replacement. So I figure that’s every few years, and I kind of plan that out. But I just, I know what my housing costs every month, electricity, water, et cetera. And I just list those things out and figure out, okay, well I spend this dollar amount a month, so it means every month just to stay even, I need to make at least this amount.
When you do this, I’ve worked with people of all income levels, from people who make $20,000 a year to people who make $20 or $30 million a year, and we still go through the same exercise in the same way and 100% of the time the answers are surprising to those I work with, because you’re not used to looking at how much you spend, and when you really do list out all of the things that you spend money on, it will help you really figure out, well, what do you need? What do you not need as much? I spend a lot of time thinking about small subscriptions, be it a $10 a month or $20 a month thing, because I started looking at them as like, well, if I spend $10 a month, I’m probably not going to cancel that subscription. So let’s see, $10 a month for a year is $120, and if I probably keep that subscription for five years, that’s a $600 expense. So before I sign up for something that’s $10 a month, I say, hey, is this really worth $600 to me? Because even in the short term, it doesn’t feel like much every month, but in the longterm that certainly adds up. And so it’s really worth thinking hard and listing out those various expenses.
Finally, one more tip that I want to get into for this episode is creating a marital history. Now, I’ve talked about this on the podcast before, but it’s an important topic and it’s worth doing, and very simple, is that you should list out all the key events when they happened in your marriage. They can be financial events, they could be relationship milestones, they could be kid related things, they could be educational related things, but what I do, it can be real estate transactions, whatever the case is, but the goal is to create a timeline. Now, why do you create a timeline of everything that happened during the marriage? Well, I put dates, could be specific dates, could be month and year. It could just be year, if that’s all the information you have at the moment.
But the importance of the timeline is that when you have a timeline, it can help you in that when you have other professionals working with you, be it your attorney, be it a financial person, be it a mediator, be it whomever, they can walk through this timeline and they will be able to see, okay, I’m starting to get a picture of how the relationship started, the key events in the relationship, and in the span of five minutes, we can figure out, all right, here’s a pretty good way to catch up on the last five years, 10 years, 30 years or more of marriage and understand it succinctly, rather than when you try and tell it to us, it’s easy to get sidetracked. It’s hard to keep everything straight. It’s easy to forget different events, but when you have just a timeline, it’s easy for us to say, okay, here’s the key things we need to be thinking about in mind, and here’s better ways that we can understand this history and therefore inform how we approach the strategy and execution of the various elements of the divorce process.
Now, when I talk about a timeline, people ask, well, what format should it be in? Does it need to be notes? Does it need to be … I say, whatever works for you, so long as it’s easy to follow. The important thing about a timeline is that it’s in order. So one of the things I like is an Excel spreadsheet where one line or one column is the dates. The second column is just a short description, a sentence, two sentences, maybe three sentences at most, of what happened and why it’s relevant, and in an Excel spreadsheet, it’s easy. If you have a Word document, you just put it there and organize it.
The point is there’s no need to over complicate it. It’s just so everyone knows what’s going on, and it’s very useful looking back even for you as to many of the things that happened during the course of the marriage, and keeping them succinct, because if you get into them, there’s oftentimes a lot of contexts you want to share and and oftentimes it’s too much too soon, but you don’t necessarily need to get into all of that immediately and right away. So one of the things I recommend is just keep it succinct. If there’s something that your attorney is going to have more questions about or that that I’m going to have more questions about, or your financial professionals or an accountant or a business valuator, whoever it is, is going to have additional questions about, we’ll ask. We know what to look for. Some things might not be relevant to us, but it all just helps, and we can distill down a lot of information quickly when you start preparing this marital history, this marital timeline of all of the key events, be it emotional, financial, family related, et cetera, that occurred, and it really helps us and helps us help you a lot better.
So the three things for this episode, is keep the big picture in mind, understand your expenses, and create a marital history. And in the next episode, I’m going to cover a few more important tips out of my top 10. We’ve covered the first six, and we will get into just a few more in the next episode, and some really important ones.