Published by Taylor Financial Group
Most people are set in their ways and, over time, their behaviors become predictable. But can a divorce cause a person’s financial behavior to change? Research conducted by the Institute for Divorce Financial Analysts (IDFA) suggests that it can. In fact, there are several key behaviors you should be aware of if you’re contemplating divorce, are in the midst of divorce, or even if you know someone who is going through a divorce. Being aware of these key behaviors can help you (or your loved one) avoid making bad financial decisions.
Biases
Divorce can cause emotions to run high and makes it difficult to see any perspective but your own. You may be inclined to hold on to information that confirms your preconceptions, and therefore you only hear what you want to hear. Moreover, being unable to let go of what you previously believed can hold you back from seeing the future and reaching your goals. For instance, you may think that since you could afford certain things before marriage, you’ll be able to afford them after divorce. But that’s not necessarily the case. We understand that the future can be hard to envision, especially in the midst of divorce. That’s why we use our personalized financial planning process, WealthMatch, which allows us to create scenarios based on your changing circumstances, to illustrate the possibilities. Don’t let the past or fear of the future paralyze you. And don’t let history (or habit) be a rigid guide to your future. Divorce means change, so let’s make it all for the better.
Confidence
You may think that divorce can only hurt your confidence, causing you to doubt yourself and others. But, in the same way, divorce can also make a person overconfident. Both extremes are bad! Lack of confidence can cause you to become inactive and withdrawn. In some cases, we have seen clients completely disengage and refuse to provide pertinent information to help us revise their plan for the future. This can result in serious consequences. So, it’s important to stay focused and gather whatever information is necessary to make the appropriate evaluations.
Likewise, if you are overconfident, you may end up taking greater risks in your investments and financial planning. We see this more with men than with women, in that men are more likely to invest aggressively, while women tend to be more cautious and conservative. This can be detrimental! For example, if there are significant market swings or overconcentration in certain investments, asset values can suffer considerably.
The Root of It All: Money Language
According to IDFA, money issues are the third leading cause of divorce. So, it should come as no surprise that divorcing spouses are not going to agree on the financial terms of their divorce, if they didn’t agree on financial matters when they were married. But it all comes down to two words – money language. Money language is said to be the way we understand money based on the experiences we have had. We all have a money language, and being aware of yours could be the key to ensuring a successful transition through divorce. Ask yourself questions like:
- Where do I want to be in 5-10 years? Why is that important to me?
- What are my priorities? Why are these priorities important to me?
- Why do I want to keep the house? Why is that important to me?
Ultimately, you should always try to figure out “why is that important to me?” Sometimes, the answer makes you realize that, in fact, it’s not that important to you after all or it doesn’t’ have to be.
At Taylor Financial Group, we always do our best to help our clients see the big picture and think outside the box. The last thing we want you to do is make poor financial decisions just because you’re going through a difficult time. We are here for you at every stage of life to guide you, help you pursue your goals, and help you live life to the fullest, all while giving you financial confidence.
Contact us today if you have any questions about divorce or about how your changing circumstances may affect your future plans.
Sources:
Institute for Divorce Financial Analysts, Divorce Financial Analyst Journal, July 2017
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.
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