The Four Stages of the Divorce Lifecycle
HEATHER LOCUS, CPA, CFP®, CDFA®
KRISTINA CARAGIULO, CFP®
Although the road to divorce is well-traveled, the stages of divorce most individuals experience are not always well understood:
Do I? Readiness
I Don’t Think So… Reality
I Don’t. Resourcing
I Did! Reimagining & Reinforcement
It’s helpful to identify the four stages of divorce and to take stock of where one currently is on the feeling’s spectrum (Shock – Anger – Resentment – Acceptance; which are common emotions individuals experience as they progress through the divorce process) in order to ensure you’re in a good place to be able to make smart financial decisions. Unfortunately, it’s not a linear path and most divorcing men and women cycle through the stage’s multiple times.
At the beginning of the divorce process, it is common to feel shocked that your marriage didn’t work out. It is extremely difficult to make smart decisions in the shock phase. And, if either you or your spouse think there may be a possibility to save your marriage, you may want to consider the Discernment Counseling Process. Discernment Counseling doesn’t try to fix your marriage, it’s designed to get clarity on whether your best path is to get divorce, commit to counseling to create a strong marriage, or continue with the status quo. Even if you decide to continue with a divorce, discernment counseling can help you and your spouse get the closure you need to minimize the conflict and collateral damage of divorce making it faster with less cost and pain. Of course, the shock can take a while to wear off and feel like readiness. Give yourself some time to come to terms with the fact that divorce is the right road to take for your situation. You should begin to gather information on the divorce process, so you are knowledgeable about your options and the road ahead.
In the reality phase, it is very important to focus only on the things you really, really, really want, and to try to keep the anger (commonly felt) at bay. There is unfortunately no perfect divorce, so there will undoubtedly be things you will have to compromise on and other things you need to let go of all together. The better you are about figuring out your non-negotiables (and what your ex-spouse wants), the easier the process will be to get through. During this phase, you should work on building your support network – you can connect with other individuals going through a divorce, join support groups, talk to your friends, etc. You should also begin to open bank accounts and credit cards in your own name and order a credit report, so you are aware of any outstanding debt in your name. Don’t sign any new agreements or make any significant changes in your life, like moving out, moving significant money, or closing joint accounts, without consulting an attorney. This is the time to begin to gather financial information easily available to you (full checklist here):
Start to gather tax returns and financial statements including bank, brokerage, and retirement accounts; hotel and airline points; and your mortgage, credit cards or any other debt. If you can only get one financial record for your professionals, take your most recent tax return.
Make a list of all your assets and liabilities.
Make a list of sources of income in your marriage.
Create a list of memberships and perks that are assets that will need to be addressed during the divorce.
Start to track what you have been spending as a married couple. Think about what will change as you split into two households.
Get a handle on the physical transitions you will have to make – new living arrangements? New daily schedules? New responsibilities? New childcare arrangements?
Confront the questions that will likely keep you awake at night. Write down your biggest fears and put them in perspective. You will not be able to answer all of them yet, but make sure you have a basic understanding of the way forward.
Once you’re through the reality stage, it is clear the divorce is moving forward, and the resourcing begins. The first thing that you’ll need to decide is how you want to get divorced – there are three processes, with pros and cons to each: mediation, collaborative, or traditional litigation. Now is the time to begin to build your empowerment team, which is made up of some combination of: attorneys, financial advisors, divorce coaches and therapists and child specialists. It is a good idea to talk to others who have been through divorce to get ideas on building your empowerment team. This will also be the time to consider if you should settle or continue negotiations, and you should lean on your empowerment team for advice in this regard.
Congratulations! You’ve made it to the reimagining and reinforcement phase. This is when the divorce becomes final and you can begin to think about The Next Chapter of your life and what that looks like. While we’re not saying it will be all roses and butterflies from here, you have a lot of the hardest days behind you. Breathe and tell yourself it will be okay – because it will!
HEATHER LOCUS, CPA, CFP®, CDFA® is passionate about helping divorcing individuals make sound decisions to enjoy a full life. As the leader of the Balasa Dinverno Foltz LLC (BDF) Divorce Practice Group, she has the experience, financial acumen and discretion to guide men and women through the uncertainty and complexities of divorce. Having navigated divorce personally and having helped many clients face the ups and downs of the process; she shares her collective wisdom in a book titled The Next Chapter and as a regular contributor for Forbes.com.
BDF organizes and simplifies things to make the tax, legal and financial aspects as straightforward as possible. We empower divorcing individuals to understand how their assets, cash flow and lifestyle are impacted so they can transition into this new phase with confidence and peace of mind. We assist in post-divorce follow up by facilitating completion of the MSA financial provisions, tracking any required annual reporting, and verifying that the financial conditions of the settlement agreement are being met. Our comprehensive planning and disciplined strategy take the emotion out of investing and avoids costly mistakes. We bring clarity and are a supportive partner to execute and update the plan as life evolves.
Heather frequently presents “When I Do Becomes I Don’t: Five Strategies for a Financially Responsible Divorce”, “Divorce and Dollars: Guiding Clients through the Tax and Financial Maze” and “The Financially Responsible Woman: Five Strategies for a Full Life”. She educates parents about the impact of their money habits on their children’s work ethic through her presentation, “Raising Financially Intelligent Children.”
Heather has contributed to various publications including The Wall Street Journal, Crain’s Chicago Business, the AARP Bulletin, Divorce Magazine, Family Lawyer Magazine, Illinois State Bar Association Family Law Newsletter and Forbes.com. She has been named an InvestmentNews Women to Watch, an Influential Women in Business by the Business Ledger, a Five Star Wealth Manager by Chicago magazine, ranked in top 200 Working Mother Top Wealth Adviser Moms, and a Forbes Best-In-State Wealth Advisor.
KRISTINA CARAGIULO, CFP® is a Senior Advisor who joined the BDF team in July of 2015. As a Senior Advisor, some of Kristina’s responsibilities include providing analysis to clients in the different areas of financial planning, maintaining client relationships, meeting with prospects and clients, and trading and rebalancing client investment accounts. Kristina is also a part of the Divorce Practice Group at BDF where she helps divorcing individuals through the divorce process and on to The Next Chapter of their financial lives. Kristina has a passion for helping people and enjoys developing a relationship and building trust with clients and prospective clients.
Kristina received a Bachelor of Science degree in Agriculture and Consumer Economics with a concentration in Financial Planning from the University of Illinois at Urbana-Champaign. She is a CERTIFIED FINANCIAL PLANNER™ professional.
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No representation is being made that any strategy shown will or is likely to achieve results similar to those shown in this presentation. BDF does not provide legal, tax, insurance, social security or accounting advice. Clients of BDF should obtain their own independent tax, insurance and legal advice based on their particular circumstances. The information herein is provided solely to educate on a variety of topics, including wealth planning, tax considerations, insurance, estate, gift and philanthropic planning.