Lili Vasileff, president of the Association of Divorce Financial Planners shares financial planning dos and don’ts
Financial planning in preparation for divorce can be an overwhelming and intimidating process. Lili Vasileff, CFP, president of the Connecticut-based Divorce & Money Matters and president of the Association of Divorce Financial Planners, is a pioneer in an industry that she believed was not addressing perhaps the most intimidating question facing women going through a divorce: “What do I do now?”
She founded her company in 1993 to empower women with the knowledge and tools they would need to successfully navigate their divorce. “What existed then, and what continues to exist,” she told Millionaire Corner, “is a lack of focused resources for individuals going through this transition. (When I started my company) it was clear that women, typically, were inexperienced, and less knowledgeable about finances, and had very few resources to tap into to gain that knowledge and a better understanding of the decisions she was being called upon to make.”
Working with women who had little experience about their finances, formulating goals or creating a budget (and in some extreme cases not even knowing how to open a bank account), Vasileff was motivated to fill a void left by divorce attorneys. “They were, appropriately, focused on the legal side (of the divorce),” she observed, “dotting the i’s and crossing the t’s. But no one was giving these women a financial planning roadmap. Many were in a state of paralysis, fear, or trauma, and didn’t know how to proceed. I thought that was a huge injustice.”
Here, according to Vasileff, are some of the most common financial planning mistakes women should avoid:
· “Don’t let the attorney make decisions for you. They are experts in the legal process, but not the experts on your life. They don’t know your goals, fears, or preferences. They navigate a legal process to make sure (the divorce) is fair and ethical. They don’t tailor it to the individual. Women need to participate in those discussions and decisions.”
· Not understanding tax implications of decisions women are called upon to make.
· Not projecting forward how your expenses will change and incorporating those changes into your settlement. “If, for example, you lose health insurance,” she noted, “you’ll have to purchase it through COBRA. That expense is vastly different from what you currently pay. “
· Hang tough. In an adversarial divorce involving children, Vasillef said, she has seen women beaten down over issues of visitation and custody. “It’s a scare tactic,” she said. “By the time talks get around to finances, women are drained of energy and forfeit their financial wellbeing for the sake of their children.”
What can women do prior to the divorce to put themselves on more solid footing? Vasileff recommended:
· Make copies of all financial records and statements. “This is good practice for everyone,” Vasileff noted. “If something happened to your spouse, would you know where your life insurance policy is? You should have this information on handy anyway, like a first-aid kit.”
· Make a list of assets.
· Obtain credit reports on yourself and your spouse. “Sometimes, when people go through a divorce, (the credit rating) holds the biggest surprises.”
· Pay down as much debt as possible.
· Set aside a rainy day fund with enough money to cover at least two or three months of expenses.
Money, Vasileff said, is the primary issue in divorce. “Couples need to communicate about money; not just about how much there is, but what their goals and values are.”
The prolonged economic downturn has only complicated the process, with some couples postponing their divorce because their assets are underwater, or there are the needs of aging parents and so-called “boomerang children” returning to the fold to consider.
Now, more than ever, Vasileff observed, “financial literacy is not just for divorce. “For men and women, whether they divorce or not, she emphasized, “information is power.”