The Best Car Insurance Companies of 2021

To help you understand what makes a top-rated car insurance company, it’s important to first find out how much coverage you need. This guide will help you understand what makes a top-rated car insurance company, how much coverage you need and ways to save money when getting a car insurance quote. Don’t worry; our top […]

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Source: thesimpledollar.com

Experian Credit Score vs. FICO Score

A young women reclines on a couch and smiles at the phone in her hand.

When you think “credit score,” you probably think “FICO.” The Fair Isaac Corporation introduced its FICO scoring system in 1989, and it has since become one of the best-known and most-used credit scoring models in the United States. But it isn’t the only model on the market.

Another popular option is called VantageScore, the product of a collaboration between the three major credit reporting agencies: Experian, Equifax, and TransUnion. It uses similar scoring methods to FICO but yields slightly different results.

Each scoring model has multiple versions and multiple applications—you don’t have just one FICO score or one VantageScore. Depending on which bureau creates the score and what type of agency is asking for the score, your credit score will vary, sometimes siginifcantly. One credit score isn’t more “accurate” than another, they just have different applications. Learn more about the different types of credit scores below.

When you sign up for ExtraCredit, you can see 28 of your FICO scores from all three credit bureaus. Your free Credit Report Card, on the other hand, will show you your Experian VantageScore 3.0.

Sign Up Now

What Is a VantageScore?

VantageScore was created by the three major credit reporting agencies—Experian, Equifax, and TransUnion. It uses similar scoring methods to FICO but yields slightly different results.

One of the primary goals of VantageScore is to provide a model that is used the same way by all three credit bureaus. That would limit some of the disparity between your three major credit scores. In contrast, FICO models provide a slightly different calculation for each credit bureau, which can create more differences in your scores.

FICO vs. VantageScore

So, what are the differences between an Experian credit score calculated using VantageScore and one calculated via the FICO model? More importantly, does the score used matter to you, the consumer? The answer is usually no. But you might want to look at different scores for different needs or goals.

Is Experian Accurate?

Credit scores from the credit bureaus are only as accurate as the information provided to the bureau. Check your credit report to ensure all the information is correct. If it is, your Experian credit scores are accurate. If your credit report is not accurate, you’ll want to look into your credit repair options.

Our free Credit Report Card offers the Experian VantageScore 3.0 so you can check it regularly. If you want to dig in deeper, you can sign up for ExtraCredit. For $24.99 per month, you can see 28 of your FICO scores from all three credit bureaus. ExtraCredit also offers rent and utility reporting, identity monitoring and theft insurance, and more.

Sign up Now

Understanding the Scoring Models

FICO and VantageScore aren’t the only scoring models on the market. Lenders use a multitude of scoring methods to determine your creditworthiness and make decisions about whether or not to give you credit. Despite the numerous options, FICO scores and VantageScores are likely the only scores you’ll ever see yourself.

Here’s what FICO uses to determine your credit score:

  • Payment history. Whether or not you pay your bills in a timely manner is critical, as this factor makes up around 35% of your score.
  • Credit usage. How much of your open credit you have used—which is called credit utilization—accounts for 30% of your score. Keeping your utilization below 30% can help you keep your credits core healthy.
  • Length of credit. The average age of your credit—and how long you’ve had your oldest account—is a factor. Credit age accounts for around 15% of your score.
  • Types of credit. Your credit mix, which refers to having multiple types of accounts, makes up around 10% of your score.
  • Recent inquiries. How many entities have hit your credit history with a hard inquiry for the purpose of evaluating you for credit is a factor for your score. It accounts for about 10% of your credit score.

VantageScore uses the same factors, but weighs them a little differently. Your VantageScore 4.0 will be most influenced by your credit usage, followed by your credit mix. Payment history is only “moderately influential,” while credit age and recent inquiries are less influential.

Each company also gathers its data differently. FICO bases its scoring model on credit data from millions of consumers analyzed at the same time. It gathers credit reports from the three major credit bureaus and analyzes anonymous consumer data to generate a scoring model specific to each bureau. VantageScore, on the other hand, uses a combined set of consumer credit files, also obtained from the three major credit bureaus, to come up with a single formula.

Both FICO and VantageScore issue scores ranging from 300 to 850. In the past, VantageScore used a score range of 501 to 990, but the score range was adjusted with VantageScore 3.0. Having numerical ranges that are somewhat consistent helps make the credit score process less confusing for consumers and lenders.

Your score may also differ across the credit bureaus because your creditors aren’t required to report to all three. They may report to only one or two of them, meaning each bureau likely has slightly different information about you.

Variations in Scoring Requirements

If you don’t have a long credit history, VantageScore is the score you want to monitor. To establish your credit score, FICO requires at least six months of credit history and at least one account reported to a credit bureau within the last six months. VantageScore only requires one month of history and one account reported within the past two years.

Because VantageScore uses a shorter credit history and a longer period for reported accounts, it’s able to issue credit ratings to millions of consumers who wouldn’t yet have a FICO Score. So, if you’re new to credit or haven’t been using it recently, VantageScore can help prove your trustworthiness before FICO has enough data to issue you a score.

The Significance of Late Payments

A history of late payments impacts both your FICO score and your VantageScore. Both models consider the following.

  • How recently the last late payment occurred
  • How many of your accounts have had late payments
  • How many payments you’ve missed on an account

FICO treats all late payments the same. VantageScore judges them differently. VantageScore applies a larger penalty for late mortgage payments than for other types of credit payments.

Because FICO has indicated that it factors late payments more heavily than VantageScore, late payments on any of your accounts might cause you to have lower FICO scores than your VantageScores.

Impact of Credit Inquiries

VantageScore and FICO both penalize consumers who have multiple hard inquiries in a short period of time. They both also conduct a process called deduplication.

Deduplication is the practice of allowing multiple pulls on your credit for the same loan type in a given time frame without penalizing your credit. Deduplication is important for situations such as seeking auto loans, where you may submit applications to multiple lenders as you seek the best deal. FICO and VantageScore don’t count each of these inquiries separately—they deduplicate them or consider them as one inquiry.

FICO uses a 45-day deduplication time period. That means credit inquiries of a certain type—such as auto loans or mortgages—that hit within that period are counted as one hard inquiry for the purpose of impact to your credit.

In contrast, VantageScore only has a 14-day range for deduplication. However, it deduplicates multiple hard inquiries for all types of credit, including credit cards. FICO only deduplicates inquiries related to mortgages, auto loans, and student loans.

Influence of Low-Balance Collections

VantageScore and FICO both penalize credit scores for accounts sent to collection agencies. However, FICO sometimes offers more leniency for collection accounts with low balances or limits.

FICO 8.0 also ignores all collections where the original balance was less than $100 and FICO 9.0 weighs medical collections less. It also doesn’t count collection accounts that have been paid off. VantageScore 4.0, on the other hand, ignores collection accounts that are paid off, regardless of the original balance.

What Are FAKO Scores?

FAKO is a derogatory term for scores that aren’t FICO Scores or VantageScores. Companies that provide FAKO scores don’t call them this. Instead, they refer to their scores as “educational scores” or just “credit scores.” FAKO scores can vary significantly from FICO scores and VantageScores.

These scores aren’t completely valueless, though. They can help you understand where your credit score stands or whether it’s going up or down. You probably don’t want to shell out money for such scores, though, and you do want to ensure the credit score provider is drawing on accurate information from the credit bureaus.

The post Experian Credit Score vs. FICO Score appeared first on Credit.com.

Source: credit.com

We Want to Retire to Florida or a Florida-Type Atmosphere and Buy a Condo With Lots of Amenities for $250,000—Where Should We Go?

Retirement locales in Florida and South CarolinaGetty Images

Dear MarketWatch,

My wife and I are looking to retire in three years from New Jersey to Florida or a Florida-type atmosphere — warm weather, no snow!

We will be getting around $5,000 from Social Security monthly and will have a little over $1 million spread among savings/401(k)/house equity. We want to buy a condo for about $250,000 that has all the extras like pools, restaurants, social activities and near the beach.

Can you make any suggestions?

Thanks,

Marty

Dear Marty,

With 1,350 miles of coastline in Florida alone, never mind the rest of the South, you have many possibilities for your retirement. But as you can imagine, properties closest to the beach are more expensive, so “near the beach” may involve some compromise.

I started my search with Realtor.com (which, like MarketWatch, is owned by News Corp.) and its picks of affordable beach communities, but didn’t stick to it exclusively.

My three suggestions are just a starting point. No place is perfect, not every development will have all the amenities you want, and every town has its own personality, so you may want to think about what else is important to you. You also may want to consider gated communities and townhomes, not just multistory condominium buildings.

As you narrow down your list, I recommend you visit at least twice — once in the winter to experience the crowds in high season and once in the summer to understand what southern humidity is like. It’s worse than in New Jersey.

Think about how you will build your new social network, even with all the social amenities in your condo building. Don’t rule out the local senior center or the town’s recreation department.

Consider renting for the first year to test it out to make sure you’ve picked the right area.

Then there are the money questions. The last thing you need is a surprise.

You’ll have condo fees; they can be quite high, particularly in a high-rise building along the beach. What do they cover and what don’t they cover? How much have fees been rising over, say, the past 10 years? How does the board budget for bigger repairs? More broadly, are you OK with the condo association’s rules?

Ask about the cost of both flood and wind insurance given that the southern coastline is regularly threatened with hurricanes. That’s on top of homeowner’s insurance. Or are you far enough inland that you can get away without them?

Walk into the tax assessor’s office to try for a more accurate tax assessment than your real-estate agent may give you. And since this would be your primary residence, ask about the homestead exemption.

And don’t forget that you’re trading your New Jersey heating bill for more months of air conditioning; what will that cost?

Finally, three years isn’t that far away. Start decluttering now. That’s hard work, too.

Here are three coastal towns to get you started on your search:

Venice, Florida

Venice Beach pier
Venice Beach pier

frankpeters/iStock

This town of nearly 25,000 on the Gulf Coast is part of the Sarasota metro area, deemed by U.S. News & World Report to be the best area in the U.S. to retire. Venice is 25 miles south of Sarasota and its big-city amenities; it’s 60 miles north of Fort Myers, the runner-up in the U.S. News listing.

It also made Realtor.com’s list of affordable beach towns for 2020.

This is a retiree haven — 62% of residents are 65 and over, according to Census Bureau data.

While you can always travel to the nearby big cities, when you want to stay local, see what’s on at the Venice Performing Arts Center and the Venice Theatre. Walk or bicycle along the 10.7-mile Legacy Trail toward Sarasota and the connecting 8.6-mile Venetian Waterway Park Trail to the south. The latter will lead you to highly ratedCaspersen Beach.

Temperature-wise, you’ll have an average high of 72 in January (with overnight lows averaging 51) and an average high of 92 in August (with an overnight low of 74).

Here’s what is on the market right now, using Realtor.com listings.

Boynton Beach, Florida

Boynton Beach condos
Boynton Beach condos

Carl VMAStudios/Courtesy The Palm Beaches

On the opposite side of the state, smack between Palm Beach and Boca Raton, is this city of about 80,000 people, plenty of whom are from the tri-state area. More than one in five are 65 or older.

Weather is similar to that in Venice: an average high of 73 in January and 85 in August.

Boynton Beach is in the middle of developing the 16-acre Town Square project that will include a cultural center and residential options, among other things. Still, this is an area where one town bleeds into the next, so whatever you don’t find in Boynton Beach, you’ll probably find next door.

At the western edge of town is the Arthur R. Marshall Loxahatchee National Wildlife Refuge, 145,000 acres of northern Everglades and cypress swamp. The Green Cay Nature Center is another natural attraction.

You can also hop Tri-Rail, a commuter train line that runs from West Palm Beach to the Miami airport with a stop in Boynton Beach, when you want to go elsewhere. The fancier Brightline train is adding a stop in Boca Raton to its existing trio of West Palm Beach, Fort Lauderdale and Miami; the current plan is for a mid-2022 opening.

This city has many amenity-laden retirement communities, and the median listing price for condos and townhouses fit your budget, according to Realtor.com data. Here’s what’s on the market now.

Myrtle Beach, South Carolina

Myrtle Beach, FL
Myrtle Beach, FL

Kruck20/iStock

If you’re ready to look beyond Florida, Myrtle Beach, S.C., with nearly 35,000 people, made Realtor.com’s 2018 and 2019 lists of affordable beach towns, and Murrells Inlet, just to the south and home to just under 10,000 people, made the 2020 list. The broader Myrtle Beach area, known as the Grand Strand, extends for 60 miles along the coast.

Summer temperatures in Myrtle Beach are a touch cooler than Florida; an average high of 88 in July, with lows averaging 74.

A word of warning: In the winter, average overnight lows get down to around 40, and average daytime highs reach the upper 50s. Is that acceptable, or too cold?

Myrtle Beach boasts of its low property taxes, especially when combined with the state’s homestead exemption. While you may think of the city as a vacation destination, 20% of residents are 65 or older. (Nearly 32% of Murrells Inlet residents are seniors.)

Here’s what’s for sale now in Myrtle Beach and in Murrells Inlet.

The post We Want to Retire to Florida or a Florida-Type Atmosphere and Buy a Condo With Lots of Amenities for $250,000—Where Should We Go? appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

A Parent’s Guide to Setting a Successful Budget for a College Student

The post A Parent’s Guide to Setting a Successful Budget for a College Student appeared first on Penny Pinchin' Mom.

 You are getting ready to send your child off to college. Before you start helping them pack their belongings, there is one thing you need to do.

You need to help them create a budget. You need to teach them how to manage their money so they can learn the tools they’ll use long after they graduate.

WHY DO COLLEGE STUDENTS NEED A BUDGET?

The truth is everyone needs a budget. It does not matter your age. If you are dealing with money, a budget is necessary.

  1. Allows you to control your money. Rather than your money telling you what it wants to do, you get to tell your money where it needs to go. You are always in control when you have a budget.
  2. It teaches financial skills. A budget helps ensure that expenses such as rent, tuition, food, insurance, transportation, and housing are paid – before spending money on the fun stuff. (It also helps to make sure you don’t spend more than you make.)
  3. Makes you aware of where your money goes. When you use a budget, you see how you spend. It is very simple to see if too much is going toward dining out when you should be building your savings.
  4. Helps you track your goals. You need to cover expenses but you should also work on building savings at the same time. Your budget allows you to not only see those goals but track them in real time.

DOESN’T A BUDGET MEAN YOU CAN’T HAVE FUN?

Not at all! If anything, your budget will allow you to have guilt-free fun.

For example, the budget may allow you to spend $50 a week dining out. That means you can go to dinner with friends once (possibly twice) a week and enjoy yourself. You won’t be left wondering how you are now going to make rent.

WHAT TYPE OF BUDGET SHOULD YOUR STUDENT USE?

There are various methods of budgeting such as the 50/30/20 and the zero-based budget. For most college students, the zero-based is the simplest and easiest to follow.

The reason is that you track everything. You give every penny a job. That means if you earn $1,500 for the month that you “spend” the entire $1,500.

You will first cover the needs (food, shelter, transportation) and then your wants. If there is money “leftover” after this is done, it can be added to your savings.

You can use other types but if you have never budgeted before, using this method is the simplest.

WHAT SHOULD A COLLEGE STUDENT INCLUDE IN A BUDGET?

The budget will vary for each person, as the income and expense will be different. However, these are the most common categories that need to be included in a budget:

  • Rent
  • Renter’s insurance
  • Car payment
  • Car insurance (also saving for annual renewal fees)
  • Food
  • Clothes
  • Utilities (phone, electricity, gas, water, etc.)
  • Tuition
  • Fees
  • Entertainment (movies, games, concerts)
  • Dining out
  • Emergency fund savings

Again, you may have items that are not included above or see some that you do not need.

However, the most important thing of all is that every penny is given a job. Account for everything you will spend each month so you never have too much month and not enough money.

HOW DO YOU KEEP TRACK OF YOUR BUDGET?

For most college students, apps or digital trackers are the best options.  But, before you rush and sign up, keep the following in mind.

  1. Cost. Many apps are free and they will work perfectly fine. Other apps have a monthly fee attached to them. If you plan to use one of them, make sure you include that as one of your regular expenses. However, do not let the cost alone be a single factor when it comes to clicking the sign-up button.
  2. Security. Your security trumps all else. You need to make sure the app uses encryption as well as two-factor authorization.

Some of the best apps include:

  • Mint
  • You Need a Budget (YNAB)
  • PocketGuard
  • Mvelopes

However, your student may also like the traditional paper and pencil method – and that is OK as well.

Find the right one that works best for your student. That is all that matters.

TEACHING THEM TO BUDGET

Knowing you need a budget and where to track it is just the beginning. You need to teach your child how to budget.

Start by looking at each category that they need on their budget. You may already know the cost for each category but if not, you may need to make phone calls or do research to know.

For example, you know the rent for the apartment is $850 a month but how much are the average utilities? Ask the manager for these costs so you can include them in the budget.

Next, decide how much they want to allow themselves to spend on food. Show them how much a meal costs for a single person at each restaurant you eat at so they can create an average.

You will then have them decide how much “fun money” they want to include as well. You can base this on them wanting to go to the movies two times a month, one concert a month, or attending three events.

Now you can see the expenses for your student. Add their income to the budget and deduct the expenses. They will see if they are operating in the black (money left over) or in the red (spending more than they make).

Show them how to adjust the numbers by increasing their savings or lowering the amount they can spend on clothes – until the budget equals zero. Zero meaning they are spending every penny they earn.

And making them keep track now will help ensure they stay on track well into the future.

 

 

 

The post A Parent’s Guide to Setting a Successful Budget for a College Student appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

What Is Considered a Good Return on Investment?

hand holding smartphone on yellow background

People invest with one goal in mind: To earn a good return on their investment. Returns can be determined by the type of investment, the timing and the risks associated with it. That means returns can vary wildly, often making it hard for investors to plan for their financial future. So just what exactly is a good return on investment?

Buying stocks has traditionally been considered a risky but high probability way to earn a good return. Looking at the performance of a market index like the S&P 500 can help lend a sense what kind of return an investor can expect during an average year.

Dating back to the late 1920s, the S&P 500 index has returned, on average, around 10% per year. Adjusted for inflation that’s roughly 7% per year.

Here’s how much a 7% return on investment can earn an individual after 10 years. If an individual starts out by putting in $1,000 into an investment with a 7% average annual return, they would see their money grow to $1,967 after a decade. So almost double the original amount invested.

For financial planning purposes however, investors should keep in mind that that doesn’t mean the stock market will consistently earn them 7% each year. In fact, S&P 500 share prices have swung violently throughout the years. For instance, the benchmark gauge tumbled 38% in 2008, then completely reversed course the following March to end 2009 up 23%. Factors such as economic growth, corporate performance and share valuations can affect stock returns.

Why Your Money Loses Value if You Don’t Invest it

It’s helpful to consider what happens to the value of your money if you simply hang on to cash.

Keeping cash can feel like a safer alternative to investing, so it may seem like a good idea to deposit your money into a savings account–the modern day equivalent of stuffing cash under your mattress. But cash slowly loses value over time due to inflation; that is, the cost of goods and services increases with time, meaning that cash has less purchasing power.

Interest rates are important, too. Putting money in a savings account that earns interest at a rate that is less than the inflation rate, that money loses value every single day as well. This is why, despite the risks, investing money is often considered a better alternative to simply saving it, as it can grow at a faster rate.

Pay a little, invest in a lot.

Distributor, Foreside Fund Services, LLC

What Is a Good Rate of Return for Various Investments?

CDs

Certificates of deposit (CDs) are considered a very safe investment because there’s a fixed rate of return. That means there’s relatively little risk—but investors also agree to tie their money up for a predetermined period of time. CDs are illiquid, in other words.

But generally, the longer money is invested in a CD, the higher the return. Many CDs require a minimum deposit amount, and larger deposits tend to be associated with higher interest rates.

It’s the low-risk nature of CDs that also means that they earn a lower rate of return than other investments, usually only a few percentage points per year. But they can be a good choice for investors with short-term goals who need a relatively safer investment vehicle.

Here are the weekly national rates compiled by the Federal Deposit Insurance Corporation (FDIC) as of Jan. 4, 2021:

Non-Jumbo Deposits

National Avg. Annual Percentage Yield

1 month 0.04
3 month 0.07
6 month 0.10
12 month 0.16
24 month 0.21
36 month 0.25
48 month 0.27
60 month 0.33

Jumbo Deposits (≥$100,000)

National Avg. Annual Percentage Yield

1 month 0.05
3 month 0.08
6 month 0.11
12 month 0.17
24 month 0.22
36 month 0.26
48 month 0.28
60 month 0.34

Bonds

Bonds are considered to be safe investments. Purchasing a bond is basically the same as loaning your money to the bond-issuer, like a government or business.

Here’s how it works: A bond is purchased for a fixed period of time, investors receive interest payments over that time, and when the bond matures, the investor receives their initial investment back.

Generally, investors earn higher interest payments when bond issuers are riskier. An example may be a company that’s struggling to stay in business. But interest payments are lower when the borrower is trustworthy, like the U.S. government. Government bonds, on average, return around 5% annually.

Stocks

Stocks can be purchased in a number of ways. But the important thing to know is that a stock’s potential return will depend on the specific stock, when it’s purchased, and the risk associated with it. Again, the general idea with stocks is that the riskier the stock, the higher the potential return.

This doesn’t necessarily mean you can put money into the market today and assume you’ll earn a large return on it in the next year. But based on historical precedent, your investment may bear fruit over the long-term. Because the market on average has gone up over time, bringing stock values up with it. As mentioned, the stock market averages a return of roughly 7% per year, adjusted for inflation.

Real Estate

Returns on real estate investing vary widely. It mostly depends on the type of real estate—if you’re purchasing a single house versus a real estate investment trust (REIT), for instance—and where the real estate is located.

As with other investments, it all comes down to risk. The riskier the investment, the higher the chance of greater returns and greater losses. Historically, the rate of return on average properties has been similar to that of the stock market, according to one study. That study found that the return on homes have been between 8.6% and 10% per year .

High or Best Return on Investment Assets

For investors who have a high risk tolerance (they’re willing to take big risks to potentially earn high returns), some investments are better than others. For example, investing in a CD isn’t going to reap a high return on investment. So for those who are looking for higher returns, riskier investments are the way to go.

Remember the Principles of Good Investing

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Financial Considerations When Getting a Divorce

In a recent episode, I shared that I would be doing a 4-part series on divorce.  I’ve been divorced for 5 years now and wanted to share what has worked for me, my ex-husband, and our 8 kids during this time. While divorce is not easy, time does help heal, and when your focus is putting your kids first, it is absolutely possible to maintain a healthy, happy family relationship.

My first episode in this series was 5 Expert-Approved Ways to Talk to Your Kids About Divorce.  My second episode in this series was 5 Ways to Co-Parent with Your Ex-Spouse. 

There really isn’t anything easy about divorce. Thankfully, as I discussed in the first two episodes, there are strategies and thoughtful ways to navigate through some of divorces issues, especially if the two parents are willing to put their personal differences aside and focus on their kids. In addition to the emotional turmoil that encompasses divorce, there is also another difficult component that couples must deal with and that is the financial aspect. 

After 25 years of marriage and 8 kids, Mighty Mommy had to get her financial house in order and make some significant adjustments going from a two-income household to a single income.

Here are four financial considerations, as backed by the experts, to keep in mind if you are thinking of or getting a divorce.

1. Get Your Financial Documents in Order

The entire divorce process is completely overwhelming, and when you begin to delve into the financial ramifications, the stress is taken to a whole new level. Once we began having our small tribe of kids, we decided I would leave my career to be home with our family. During the last 10 years of our marriage I went back to work part-time as a freelance writer but by no means was I contributing significantly to our income. My ex-husband managed the majority of our financial affairs so when the reality of our divorce settled in, I knew the first thing I had to do was get a handle on every aspect of our financial status. I honestly wasn’t sure where to begin, but my divorce attorney recommended I start by gathering all my financial documents.

Maryalene LaPonsie, contributor to USNews.com writes in 7 Financial Steps to Take When Getting a Divorce that “as soon as you know you’re getting a divorce, collect all the financial documents you can.” She continues, by stating that these include:

  • “Bank statements”
  • “Credit card statements”
  • “Tax returns”
  • “Retirement account balances”
  • “Appraisals for valuable items, if available”

In addition, other documents to consider are:

  • Mortgage Statement, including any Home Equity Loans and purchase information
  • Checkbook Registry for the last year
  • Any other long-term debt account statements you may have, including car loans

2. Know Your Income and Expenses

When we began our divorce proceedings, I admit I was far more focused on my emotional state than my finances. 

When we began our divorce proceedings, I admit I was far more focused on my emotional state than my finances.  Because my ex was the one who paid all the bills and the sole provider for most of our marriage, I never worried much about the details of our 401(K) plan, life insurance policies or what our overall assets and debt totaled.

One piece of advice I received many times over was that I needed to know what our budget was so I could begin to realistically know what my living expenses would be. 

Jason Silverberg, CFP at Financial Advantage Associates, Inc. and author of The Financial Planning Puzzle, told me via email: “If there was one singular, most important piece of financial advice that I could offer someone going through a divorce, that would be to understand where everything is and what everything’s worth. Without knowledge of what you own and who you owe money to, you really are going to have a hard time moving forward. You’ll also want to understand all of your sources for income and all of your monthly expenses as well. This will help you have a good handle on your budget to provide you critical understanding, so you can make smart financial decisions.”

He went on to say, “This exercise should be done both prior to as well as after the divorce. This way you can get a sense for how your household budget will operate on one income.” To help divorcing couples realize these figures, Silverberg has created the Personal Financial Inventory (1 page worksheet) inside the Picking up the Pieces eBook.

This exercise was extremely enlightening as I realized exactly where every penny (and then some) was going on a monthly basis. I was also able to gauge how much income I would need to start making in order to support these bills in addition to the child support and alimony payments I was receiving. One important factor to consider with child support is that it will decrease as your children get older, so I had to continually modify my budget based on this decrease. At first, it was overwhelming to see how much money I would need to keep our household running, but when you are armed with the figures and you pay attention to your monthly cash flow, it becomes easier to make adjustments. The fact of the matter is that some of the extra splurges such as frequent trips to the hair salon or buying my kids their usual top-of-the line items like sneakers or sports equipment had to be adjusted to what I could now afford. My kids have had some disappointments in this department, but they appreciated how we were trying to work together as a family-unit so that their lifestyle wasn't affected as drastically as it could've been which balanced everything out.


3.  Consider What Professionals Will Represent You

There are important considerations to keep in mind when choosing which divorce professionals will represent you. Adrienne Rothstein Grace writes on the Huffington Post, 3 Steps to Prepare for Your Divorce, that you must align yourself with the right professionals.  She explains “First, think about the divorce process you and your spouse will want to undertake and ask yourself the following questions:

  • “Is this going to be an acrimonious divorce? Or will my spouse and I cooperate?”
  • “Do I already know about all of our household and personal finances? Or do I suspect that I may be out of the loop on some assets, debts or income sources?”
  • “Do I trust my spouse to be cooperative and forthright?”
  • “Do I have any reason to believe that I will feel intimidated by my spouse during these proceedings?”
  • “Are we both focused on the wellbeing of our children?”

Grace says that “If you believe that you and your spouse will cooperate and will have joint best interests in mind while negotiating, then you might want to choose a divorce mediator or embrace a collaborative divorce. Those options are less costly, more private, and usually result in a more peaceful settlement process. However, if you’re not certain about finances, or cannot trust your spouse to be completely above-board and cooperative, then you might hire a traditional divorce attorney, who will only have your interests in focus while they help negotiate the complexities of your divorce.”

My ex-spouse and I decided to retain individual divorce attorneys. In addition, we also hired a Certified Divorce Financial Analyst, (CDFA) at the recommendation of each of our lawyers, who met with us jointly to give us a complete overview of what our financial future was going to look like. It's a huge wake-up call when you see all the numbers in front of you on paper.  At our first meeting with the CDFA I learned quickly that I was going to have to go back to work, full-time to sustain the home we lived in as well as the upkeep, taxes, insurance, and basics like groceries for our large family. 

It's a huge wake-up call when you see all the numbers in front of you on paper.

If you surround yourself with competent, caring professionals who will guide you through this very delicate journey, you will have made an important investment in your family’s future, financial well-being.

4.  Stay in the Financial Know Throughout Your Divorce

Throughout your divorce, you’re bound to get all kinds of advice from friends, family, co-workers and other concerned individuals that will be looking out for you and have your best interest at heart.  This can be both helpful and draining depending on your relationship with these people.  When I began divorce proceedings, I too received lots of comments and suggestions from well-meaning folks, but I also decided I wanted to be armed with my own facts so I began reading lots of articles and books as well as listened to informative podcasts about divorce, particularly financially-related pieces.

My QDT colleague, Laura Adams, Money Girl, recently did an wrote about divorce in Getting Divorced? Here's How to Protect Your Money. She interviewed Stan Corey, a divorce expert and author of a new book, The Divorce Dance. This podcast had some terrific insight and some of the topics she and Corey cover in this interview include:

  • Different types of divorce proceedings that you can choose
  • The biggest mistakes that can cost you financially in a divorce
  • Why relying on a single family law attorney can be a bad idea
  • Tips for dividing up financial assets the right way—especially when you’re not so financially savvy
  • How to get divorced when you don’t have much money to pay for it

As you continue down the path of your divorce, surround yourself with as much information as you can, so that you will be able to make the best decisions possible for you and your children.

Five years later, I am still watching my financial picture very carefully.  I work full-time and do freelance work on the side in order to maintain my home and other living expenses.  I am extremely grateful that my ex-husband is very supportive of many of our 8 children’s extracurricular expenses, but the reality is I’m responsible for my own financial future so I have learned to be extremely careful with purchases and expenses.

The final topic in this divorce series will revolve around putting your kids first after the divorce.

How have you managed your finances during a separation or divorce?  Please share your thoughts in the comments section at quickanddirtytips.com/mighty-mommy, post your ideas on the Mighty Mommy Facebook page. or email me at mommy@quickanddirtytips.com. Visit my family-friendly boards at Pinterest.com/MightyMommyQDT.

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Source: quickanddirtytips.com