Ending the financial part of your marriage is no different from ending a business relationship. If you walk away from this article with a mantra, it should be the following:
Focus on the money. You need to separate your emotional state from your financial sate. Splitting property is a matter of dollars and cents. A good financial settlement in a divorce is based solely on the numbers.
Judges nationwide endorse the principle that you need to keep your emotions in check while going through the divorce process – especially the business end. If you are angry (and a lot of people are), get it over with before you make you business deal. Redirect your anger into constructive bargaining.
Anyone who has gone through a divorce truly appreciates that divorce is a process that takes place over time. It doesn’t begin with the filing of a complaint and end with a divorce decree. It begins when you are unhappy. The unhappiness grows until finally you know you can’t spend the rest of your life with your present partner. Or perhaps, it may begin more abruptly, with your partner telling you that he or she is unhappy, or has a new love, and the marriage is over. Either way, the divorce process generally takes longer than either of you would like it to last. (One couple who were married for only two weeks took four years to dissolve the union. They were so emotionally involved in the process that they weren’t able to let go of the marriage.)
A psychological process parallels the legal. Going through a divorce is similar to living life on a constant roller-coaster ride. One minute you’re up, and the next you’re plunged in deep despair. Along with unhappiness comes denial. You may then get angry – angry about the financial burdens your spouse is loading you with, furious at your spouse for screwing up your life and those of your children (if you have a family), or angry at him or her for causing your present life – however wretched it may be – to end.
These feelings are all very common when a marriage is breaking up. From a financial perspective, however, you can never negotiate your business deal until you are ready to take emotion out of the bargaining.
If your spouse is the one who announces the marriage is over, you may find yourself instantly behind psychologically and legally. Usually, the spouse who decides the marriage is over will have gone through a great deal of the emotional process before you even know a split is imminent. (He or she may also have stashed money or other assets, too, and done some financial housekeeping as well as emotional fine-tuning.)
If you find that you are unable to emotionally detach yourself from your anger, discuss with your attorney whether there is a way to delay making decisions concerning your financial status. (Certainly, this rule applies to custody decisions also!) You do not want to hold up the process indefinitely; however, taking a needed break may make better sense than acting rashly.
Don’t let your emotions get in the way
A marital therapist stated, "Generally, the number one feeling that rules when divorce is impending is abandonment or betrayal. People feel emotionally abused, too. Too often, when you want to get back at your partner, you do it economically. You may feel that you were in the marriage for the long haul, and when you find out it is over, you want revenge or punishment. And that gets translated into a desire for dollars and cents." The therapist’s recommendation: "Get a grip on your emotions. You can’t let fears or guilt or misplaced anger get in your way. That can end up costing you more in legal fee than you get in your settlement."
Remember: Your economic security in on the line.
Money only renders the already significant differences between the sexes more glaring, and nowhere is this more evident than in divorce. Whereas men often use conflict as a means of connecting with others, many women will go to any length to avoid conflict. Women tend to use cooperation and talking as tools for working out their difficulties.
Don’t let your emotions – specifically your desire to avoid hostility and other painful feeling – get in the way of fighting for what you deserve. Women tend to avoid hostility and overt anger; generally, wives are more willing than husbands to compromise for the sake of a relationship. Often, women in divorce negotiations avoid conflict for the sake of ending the relationship with as little face-to-face confrontations as possible with their soon-to-be ex. But in the divorce arena, such women can lose financially because their fear of anger and dislike of hostility trumps their desire for financial security. Women often come away from divorce with a much diminished lifestyle. Whether you are male or female, not fighting for your fair share is easier than being aggressive and not standing up for what you deserve. The problem is that not fighting may leave you broke.
Carol was married for a short time. Her husband, Sam, had a job that required him to do a lot of out-of-town travel. Carol was unhappy and lonely and had an affair with a co-worker. When she decided that she wanted out of the marriage, she confessed to Sam that she was having an affair. Sam was furious. He knew Carol loved the house they had bought together. She spent much of the time while he was traveling fixing up the house, adding a new family room, planting a garden, and landscaping a large backyard.
Sam decided to relocate, and he forced Carol to put the house up for sale and split the proceeds fifty-fifty, even though much of the appreciation in the value of the house was due solely to Carol’s hard work. Carol, overwhelmed with guilt over the breakup, caved in and put the house up for sale rather than attempting to buy out Sam’s share of the house and fight for her contribution, despite the fact that she would have been able to pay the mortgage payments and the upkeep of the house on her salary.
Carol’s emotions got in the way of the business deal. She didn’t do her economic homework. Instead, she allowed Sam’s anger and her own guilt to overwhelm her.
Both men and women fall into the trap of giving away more than they should. As with Carol, this may occur out of guilt. At some point in the divorce process, my clients declare that because the marriage has failed, they have failed, and they should pay for that failure. Men are more likely to want to "absolve" themselves of their supposed failure by giving away more financially to make us for this feeling. When a man’s earning capacity far exceeds his wife’s, it may seem easier to throw money at a problem than to work it out.
If a husband wants to provide generously for his wife and does so knowingly, that’s fine. However, I have heard men ten years after their divorce that they should have thought twice because they acted out of guilt rather than generosity.
Dan and his wife were young and had no children. When divorce arose, his psychologist recommended that Dan get on with his life and get out of his marriage with as few emotional scars as possible. His lawyer pushed him not to give in and to fight a little harder to keep what was rightfully his. Dan decided not to fight, and he gave in on all the assets he considered "small things." He walked out of the marriage, leaving the house and everything in it.
Dan’s wife didn’t have a job at the time, and he felt sorry for her. He figured that as the major breadwinner, he should at least set her up at parting. Dan had a second objective: to walk away from the marriage without dealing with the pain. "There’s a tendency for men to blow off stuff," he said. "It’s a way to not deal with the pain." Facing a second divorce, Dan’s resolves was strong. He didn’t want to be hard-nosed, but he knew he could not afford to walk away without getting what was fair. One woman in the same situation echoed Dan’s feeling about his first divorce: "You have got to deal with the emotional pain while you are going through the process, or it will haunt you later." It also may cost you a lot of money and property.
Both parties in a divorce usually end up with less than they need to live comfortably. You cannot afford to give up any part of your fair share merely because you are afraid of being yelled at. Conversely, you can’t afford to give up too much because you feel guilty and just want to get it over with with the least amount of hassle. Doing what is least painful at the time rather than what is necessary can be costly in the end.
In a divorce, each party feels wronged. This emotion at the bargaining table prevents you from seeing things clearly and reaching a good property division. Self-pity and victimization too often lead to a path of revenge, a "scorched Earth" policy in which you become fixated on grabbing everything you can to get back at your spouse.
In the eyes of the law, however, splitting property has little to do with revenge. In fact, in many states, the notion of fault does not enter into the equation of who gets what. Unfortunately, money can represent power, control, or love itself. When it comes to divorce, learn what money means to you. Determining what you value and why will help you examine your approach to the division of your marital property. What is motivating you to fight over a wedding present? Why do you want to keep the marital home if you can’t afford to? Why don’t you want to get your spouse’s pension valued? Why are you fighting to keep the silverware when you could sell it, invest some of the money, and use the rest to pay off debt? Whatever your emotional attachment to certain things you jointly own, you have to work out your feelings. Don’t blindly fight for objects it is not in your economic interest to keep.
Marriage merges two people with different backgrounds and belief systems into one unit, each bringing their own "baggage" into the new relationship. Often differing beliefs can separate rather than unite. Differing views may also prompt us to place too much weight or value on things that are not important. One judge from the West said that when marriages fail, people expect judges to come in and rearrange reality. "During the course of our lives," she states, "we develop strong beliefs. Many of them often go unexamined." To get at personal belief system, this judge will often ask individuals before her to tell her all about their families. Were their parents divorced? If so, how old were they when they divorced? We do what our families taught us by their actions. Some of us grew up scrimping every penny. Other may have grown up in households where they lacked nothing.
Judges, lawyers, and therapists tell the same stories. Most couples displace their anger at one another by fighting over material object or, worse, their children. Clashes of belief systems often find expression in the odd ways people treat certain items in a marital estate. They begin to obsess over objects that had little value for them before but that now, in the light of divorce, take on exaggerated (and often absurd) significance.
During divorce, you may obsess over not getting a certain piece of furniture a relative gave you as a wedding present when you should be focusing on the complete financial settlement and what you will have to live on. You may decide you can’t sell the house you have spent so many years redecorating and raising your children in when you really should be focusing on whether you will have enough money after the divorce to afford the upkeep of the house.
Such obsessions usually are a waste of time, and they can decrease your final share of the marriage estate. The antidote is to get a hold of your emotions. Examine what you really find valuable, and keep focused on the ultimate settlement – not revenge, not obsessions – the final deal.
It’s a matter of trust
Sex and money are often the catalysts to divorce because they get at the core issue of trust between partners. Shattered trust is an emotionally charged issue, but emotions cannot be allowed to spill over into the business deal.
Client have come to see me after a spouse has confessed that they are contemplating bankruptcy because they owe substantial debts. Such bankruptcies often occur in a business situation, often when a spouse, as sole owner of the business, has 100 percent control of the money. Sometimes a disaster can start seemingly innocently. The business owner, as a spouse, short one payroll, borrows money to meet it – just this once. The next pay period rolls around, and more money is borrowed on the line of credit. Some spouses have even co-signed notes with their partners without understanding the financial consequences. (One educated professional felt she trusted her spouse enough to co0sign whatever he placed in front of her. When her spouse declared bankruptcy after their divorce, she was left paying the bills.) Who ultimately will bear responsibility for those bills will determine the quality of future lifestyles.
Sally was a great mom, a terrific teacher, and a coach for after-school sports. Her husband, Jim, ran a successful clothing business. The business started small but very quickly expanded to a number of locations. Jim bought Sally a new SUV and expensive jewelry, and he surprised her with some lavish vacations. Jim was financing these luxuries with money he should have used to pay taxes. When the taxing authorities caught up with Jim, Sally had gotten quite used to a fine standard of living. When a tax delinquency notice came in the mail, Sally confronted Jim. Jim promised that he would be responsible and start paying down the debt. Jim couldn’t reform. He continued funding their lifestyle with his tax money because he was too ashamed to admit that he couldn’t afford such luxuries any other way. Sally refused to face reality and see that her lifestyle couldn’t continue unless she cut back. Sally also found herself attracted to the male soccer coach, her counterpart for the boy’s team, and started a new relationship.
One year later, when Sally discovered that the tax bill was larger, she wanted out of the marriage. She thought she would just start a new life with her new friend. She decided divorce was the only option for her.
Jim wanted to save the marriage. However, he was crushed when he found out about Sally’s new relationship. Jim faced bankruptcy. He decided that wasn’t the route he wanted to take. Instead, Jim was faced with crushing debt. He was angry at Sally and felt she had betrayed him with her affair. Sally, however, felt no guilt. She went after all their pensions and the marital home. Sally wanted the material possessions, and she got them. Jim was unable to let go of his home. He gave in and gave Sally all the assets and none of the debt. Sally was lucky; she had not co-signed any notes, and she was not personally liable for the tax debt. Jim was saddled with hefty bill. He regretted that his shame prevented him from admitting to Sally that he was getting deeper into debt. A few years later, he was still bitter and angry that he worked twelve-hour days six days a week to keep afloat. He recognized too late that Sally bore some fault for the relationship failure. He didn’t cut a good business deal.
The bottom line is: Focus on finances. Don’t get blindsided by hatred, inattention, anger, or revenge. You may feel cheated, abandoned, furious, and many other emotions, but you should put all this emotional energy into getting your full and complete financial picture. If you know all your individual and collective assets, you can cut your financial losses and be more in control of your life at a time when you feel most vulnerable and least able to cope. Controlling your emotions can translate into cutting your best financial deal.
This article was edited and excerpted with permission from Divorce and Money: Everything You Need to Know by Gayle Rosenwald Smith, J.D.
Certified Divorce Financial Analyst
Business Valuators / CPAs