Cash Flow in Divorce
Avoiding Financial Mistakes in Divorce using Future Projections of Income/Expenses
Are you anxious over what the future holds for you post-divorce? One area that can cause a lot of grief for clients is figuring out future income and expenses, but you don’t have to go at it alone. At The Financial Knot, we provide cash flow projections (projecting future income and expenses) to help you understand how the decisions you make in your divorce will impact your financial future. Your attorney and CPA won’t tell you how your settlement will affect your future. It’s not their role. They are there to guide you through the divorce; it is a transaction-based relationship, meaning when the divorce is finalized many times, so is the relationship. At The Financial Knot, we guide you through divorce AND can continue to support you after your divorce with our post-divorce transition assistance. We already have your data surrounding income, expenses, and assets; therefore, we simply continue to use this for your financial plan post-divorce.
Cash flow is the increase or decrease in the amount of money you have, typically calculated monthly or yearly. By doing this over a period of years, you can see whether decisions you make will put you in the positive for the long term or the negative; and what changes could be made to impact your cash flow to the positive whether budget adjustments or structuring a settlement differently, etc. Getting divorced without considering the financial impact those decisions have on your future is like planning a dinner party without knowing how many people are coming or taking a trip without knowing how many days you’ll be gone.
An example I run across a lot is one party desiring to keep the marital home. Sometimes, this is the party that cannot afford to keep the home. They may not realize this until we look at their budget and their cash flow projections for the future. This usually will illustrate to them that even with severe budget cuts, they will not be able to afford the home or will not enjoy their lifestyle due to the budget cuts. They may decide to not keep the home and look at some alternate options. It’s better to know this before you settle in divorce than being required to have a “fire sale” on the home after the divorce to be able to pay your bills and not go in debt.
Cash flow projections in a business can help a business owner understand if they can afford certain options to buy their spouse out of the business and which option works best for them; how to structure the note. Should the note have a balloon payment at some point? As the business owner, how will you save for this future balloon payment? A business cash flow analysis can assist you with some of these decisions.
At TFK, we assist all types of families; either as a Financial Neutral when couples want to work together, or as a Financial Advocate for one party when couples choose the traditional divorce model. As a Financial Advocate, I’ve seen some troubling trends.
Many times, I am hired by women to do this work, because women are traditionally the party that have not been involved in the family finances. This is changing, and I see more women participating in family finances, but, especially with women in their 50s, 60s and 70s, this is usually not the case. A typical scenario I see in my office is a woman over 40, whose kids are leaving home soon, and she needs assistance understanding all the financial components of her marital agreement and wisdom in forming a budget for her future. Cash flow projections are at the heart of helping clients see what they can spend monthly and set up a reasonable budget.
The Financial Knot is a haven for women in divorce. To learn how we can help, schedule a call today at (803) 403-1308.
