In Divorce Negotiations, Keep Your Eye on the Long Run

Women especially tend to focus too much on today.

-- Going through a divorce can be extremely difficult. Because the outcome will have a lasting financial impact, it’s important to address critical issues early on.

Women undergoing a divorce can be highly vulnerable if they haven’t been involved with the family finances because of a lack of financial empowerment. For these women, financial decisions can be particularly difficult.

Every financial decision they make before and during property-settlement negotiations should be evaluated with this question: What will be the impact on your long-term financial security?

If you’re a woman facing divorce, there are some things that you should attend to right away:

  • Before you begin negotiating with your spouse on assets, identify all assets and find out where they are held. You can’t divide these assets fairly if you don’t have a handle on them and their value. While you’re at it, check to see who the beneficiary is for each asset.
  • Construct a budget showing what it would cost for you to live apart. When one household splits into two, it’s expensive for both parties, so try to identify must-haves and things you can live without to arrive at a realistic estimate of the monthly figure you’ll need to pay expenses as a single individual.
  • Check your credit ratings. Some sites, like,
  • Set aside money for an attorney. Many people resent the reality that they must pay an attorney when they get divorced, but you can’t expect them to work for free. And a good attorney isn’t cheap. Rates vary in different parts of the country, but $200 to $400 per hour isn’t uncommon. So be sure to plan on this major expense. (Depending on your situation, you may need to also set aside money to pay an accountant.) Keep in mind that the more you ask your attorney to do, the bigger bill you’ll run up, so be sure to confine their services to actual legal work. During your first meeting with the attorney, don’t spend a lot of time talking about how the marriage went bad while the meter is running; this information is probably moot.
  • Your legal goal should be to get things settled without litigation, because all too often, the only financial winners in litigation are the attorneys. Moreover, you want to avoid the stress and lasting emotional damage that litigation can bring, so you want an attorney who can help you achieve a fair and balanced settlement rather than one who may tilt things toward litigation to rack up more billable hours. Mediation is a great alternative to litigation because it costs far less, is less adversarial and involves professionals whose goal is to help you and your spouse resolve differences rather than fanning the flames of conflict.

    Too often, women getting divorced confuse alimony with financial security. But alimony just sustains dependence on your spouse. Moreover, alimony has limits, and you may not collect it all. Real financial security comes from self-reliance.

    When you get into negotiations over marital property, remember that what may seem like a good property settlement now might not look so good down the road. To look after these long-term interests, be sure to evaluate options using these criteria:

  • Your future lifestyle. If you can’t afford the upkeep, taxes and, to the extent that your settlement may saddle you with these payments, the mortgage on the marital home, then you might want to choose other, less “expensive” assets to go for instead. You should make such decisions with an eye toward a manageable, affordable monthly expense figure. Your current home might not fit into this picture. The same might apply to a car. If you’re driving an expensive car and you get it — and the payments — in the divorce, can you afford these payments, higher insurance costs, gas bills and mechanics’ bills, as opposed to those for a more modest car?
  • Your future net worth. Your net worth is the sum total of all of your assets and all of your debts. It affects your credit rating, the interest rates you pay on loans and, because many assets are ultimately liquidated for retirement, your resources to pay retirement expenses. You want a property settlement that establishes the best possible net worth or one that can be a solid building block toward that goal.
  • Your total tax liability. When negotiating the division of marital assets, try to keep the discussion in after-tax dollars. That’s the real value, as you always have to pay Uncle Sam.
  • Your retirement. Retirement planning is always a major consideration. If you’re 25, of course, it won’t be as critical as it will be if you’re 50. You want to come out of the divorce with assets that can fit into, or be sold to produce cash for, an investment portfolio to build your retirement nest egg. If you’re spending too much on upkeep and taxes on a huge house, that cuts into this ultimate nest egg. If in your settlement you get money in tax-deferred accounts like an IRA or a 401(k), that may be a good thing for your retirement, provided that you don’t need the money until after you’re 59½ (when penalties for early withdrawal no longer apply) and preferably after you’re completely retired and in a lower tax bracket than when you were working. However, under some circumstances, you can take money out of these accounts early without penalty. As a rule, though, you should avoid taking money out of retirement accounts early. As most states consider retirement benefits to be marital assets subject to division, you may want to get your spouse’s 401(k) assets or pension assets on the table for division. To get a piece of these assets (but not IRA assets), you need a QDRO (qualified domestic relations order), because a court order approving the divorce property settlement isn’t enough. This is a highly technical area, so you might need to bring in a specialist.

    Regarding Social Security, if you are married for at least 10 years, you will want to claim your spouse’s benefits (if they’re higher than yours) at no cost to your spouse.

    Throughout the process of negotiating your property settlement — and, you should hope, not litigating it — keep in mind that the right thing to do is to go for what’s fair. You were married to this person and, especially if you have children, you shouldn’t want to punish them or rip them off. Of course, fair means fair to yourself as well as your ex. By keeping these points in mind, you stand a better chance of getting a fair settlement whose lasting impact will be beneficial for the long haul.

    Any opinions expressed here are solely those of the author.

    Laura Mattia is a partner with Baron Financial Group, and a fee-only financial advisor. She's a Certified Financial Planner professional (CFP®), a Chartered Retirement Plan Specialist (CRPS®) and a Certified Divorce Financial Analyst (CDFA™) and holds an M.B.A. in accounting/finance. Her Internet radio show is Financially Empowering Women™ with Laura Mattia. A former professor at the Rutgers University Business School, Mattia is completing a Ph.D. in financial planning from Texas Tech University; her dissertation is on how to help women plan for retirement.