Call Me Skeptical, But... by Vickie Adams

Call Me Skeptical, But…

Call Me Skeptical, But... by Vickie Adams{3:30 minutes to read} In over 25 years as a Certified Financial Planner(™) professional, nobody’s ever called me and said, “I won the lottery.” A few have announced they’ve received “unexpected sudden wealth” and want to plan for the rest of their lives. More often, people call me to say “I’m afraid that ”…. and you can fill in the blank from there. “My company has downsized,” or “Health issues are forcing me to retire prematurely and I’m financially unprepared.” But the most frequent call in So Cal is: “I’m getting divorced and don’t think I’m going to get what is mine.”

Most people come to a financial planner when they are experiencing a specific problem or are at a critical transitional point. Something out of their comfort zone needs to be addressed.

It’s only natural that people want to postpone uncomfortable conversations and not think about the consequences that might or will happen; this is wishful thinking. Some examples are:

  • Unrealistic planning for divorce settlements: I advised a newly divorced client in 2008 not to buy a house at the top of the market, as she truly couldn’t afford it. She hoped all things would work out perfectly, but they didn’t. First the housing market cratered, and then she got very ill unable to work at all, and subsequently she lost the house—the worst possible outcome of a wishful-thinking scenario.
  • No discussion about finance in a first marriage: Walking down the aisle without having a conversation about financial goals, values and responsibilities can set the stage for conflict later. Just because you are both hard workers and on the same page with everything, don’t assume that money issues will just work themselves out. They rarely do without planning. Even fewer want to bridge the subject of a prenup prior to marriage.
  • Insufficient financial planning for the next marriage: No prenup or revised estate plan. Clients are sometimes relieved to have found love again and feel as though they both have their ‘own things’ not realizing the consequences of living in a community property state. Ownership of assets during second marriage as well as estate planning should all be addressed well in advance.
  • Postponing tough choices during a divorce: Sometimes clients look for a simple or inexpensive solution to a complex issue. They think they can work together in a family business or continue to own property together post-divorce. They leave certain items in a limbo state to be decided later. This usually results in addressing the same issue again and at even greater expense in a post-divorce modification.

In financial planning, being negative can be good for you. Having a healthy degree of skepticism and being realistic can protect you in the long run. “Hope” often translates to denial of the possible reality. Hope should never be the lynchpin of your financial plan or your divorce agreement.

The thing that pops into your mind, that you think could never happen, is exactly what usually rears its head. Anyone experiencing a major life transition, such as planning for divorce or negotiating a financial transaction of any kind, should consult a CFP for a holistic, factual point-of-view. If you find yourself at a life cross-roads, call me, I can help.