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Understanding Your Relationship with Money: 10/01/2017

A win-win divorce


Most people are not well informed about a financially smart divorce. U.S. Bankruptcy Court statistics show that the financial ramifications of divorce are the fifth most frequent reason cited for bankruptcy in this country. The true cost of divorce includes not only attorney fees, but also possibly thousands of dollars you may unintentionally give your soon-to-be ex-spouse, or to the IRS.

When considering divorce, the first professional most people contact is an attorney. And the first questions asked by the attorney include the amount of money, assets, debt, and monthly income/expenses shared as a couple so that the attorney will know how to split the assets 50/50, as required in California.

According to financial mediator and consultant Sandy Arons, of Arons & Associates (, the divorce process is 45 percent emotional, another 45 percent consists of numbers, and 10 percent involves the law. Financial decisions based on emotions will cost you far more in future dollars than you’re probably aware. So it makes sense – and would be helpful to your attorney – to first call a therapist and a financial mediator. This will reduce stress and anxiety as you become knowledgeable and empowered about your numbers, producing rational, economically sound financial decisions. Then both spouses meet with their attorneys with financial documents in hand, saving time and often thousands of dollars.

A divorce financial mediation helps craft your own solutions in a private setting rather than in depositions or court. The mediator is a “financial neutral” who focuses on the financial aspect of your divorce. Acting as a neutral third-party helps both spouses resolve property division and other issues. The goal is for you both to:

  • Incorporate findings into the final settlement documentation. 
  • Remain equitable and fair. 
  • Provide both spouses with a clear understanding of short- and long-term settlement impact. Address and explain the settlement’s potential tax consequences.
  • Minimize emotional turmoil and unnecessary professional fees. 


A 50/50 settlement isn’t always fair. If a spouse put his or her career on hold, or left the career world to care for children, this should be considered during settlement discussions. What is the earning potential today for the one who stayed at home? How long will she or he need to work at a first post-divorce job before they return to a self-sustaining income? Career counseling helps create realistic expectations and reduces returns to attorneys to restructure settlements. It’s typically impossible to transition from a stay-at-home parent to financial independence quickly. If minor children are at home, the work schedules for both parents are impacted and may reduce income potential. Additionally, the settlement must ensure both spouses understand long-term implications of the proposed settlement and potential impact on the family, i.e., inflation, increased expenses for older children, and more.

Common divorce money mistakes

(provided by Arons & Associates)

  1. Underestimating expenses 
  2. Assuming attorneys handle everything 
  3. Incorrect utilization of experts 
  4. Uninsured alimony and child support 
  5. Who keeps the house? 
  6. Not considering mediation 
  7. Accepting an offer just to get it over with 
The cumulative effect of common financial mistakes can grow over time. For example, if monthly expenses are underestimated by as little as $300, and unexpected monthly expenses (car repairs, etc.) average $167, and alimony taxes of $225 aren’t included in the monthly budget, then the immediate impact is $692 more monthly expenses than planned, and $8,304 in unexpected expenses in the first year.

According to Price Waterhouse Cooper, divorced women who are single parents are most likely to file for bankruptcy. Mothers frequently want to keep the house and sacrifice retirement money or other assets. When worried, their instincts are to keep the family together, minimizing disruption for their children. Most women don’t compile a detailed list of living expenses and believe they can afford the house. They forget about roof repairs, appliance replacement, insurance deductibles, and new tires. Women frequently keep a house they cannot afford and then plunge into debt – and many times bankruptcy – trying to keep a dream alive.

Men make plenty of their own financial mistakes during divorce. But men typically earn more than their wives: the negative impact of their decisions aren’t as great. It’s equally important that they have a complete list of living expenses and tax issues (including capital gains taxes on investments sold and penalties for early withdrawal from retirement accounts.) Otherwise, good intentions or a guilty conscience could cause a husband to agree to a divorce settlement he can’t afford. He and his ex-spouse will be back in mediation or court within two years and the expense of divorce continues.

Retirement benefits often form part of a couple’s total marital estate. If one of you has a retirement plan at work, you should consider the following:

  • Are there restrictions on distribution to a spouse/ex-spouse? 
  • If my ex-spouse dies before he/she retires, can I still receive my portion of the pension listed in the settlement? 
According to Sandy Arons, “I’ve seen too many cases in which the divorce settlement divides the retirement benefits, but the spouse never receives the money because the plan had restrictions on how funds were divided. Don’t make the mistake of assuming your divorce attorney/lawyer has carefully reviewed retirement accounts and pensions.”

Divorce doesn’t have to be a battle. When you have the financial information and education you and your attorney need to make informed decisions, you’ll have a better future outcome.

To learn more about your relationship with money, visit and take the complimentary “Money Type Quiz.” Only you will see the results. Or contact me at

Donna Colfer has worked in financial management since 1987. As a Financial Counselor and a Certified Money Coach, she blends her financial expertise with spiritual counseling in her private practice in Sonoma. A Valley resident since 1981, Donna and her husband, Randy, reside in Kenwood.

© 2020 Donna Colfer


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