Category Archives: Finances

Financial Perspective: Financial planning for the divorced woman: you are in control

January 25, 20223-bottom, Finances, How-To's, Local Businessdivorce, Finances, Planning, womenJoanne

By Dave Stanley
Integrity Financial Services, LLC

If you’re a woman, who is divorced, in the process of divorcing, or is contemplating a divorce in the near future, understanding a few key things about the financial implications of a marital dissolution will go a long way toward helping you regain the confidence you need to take control of your wealth.

After a divorce, some women, especially those whose spouses were in charge of the household finances; find themselves in the confusing and uncomfortable position of having to learn personal finance from scratch. They now have no choice except to take responsibility for earning, saving, paying bills, and investing for retirement.

It’s unfortunate that many divorced women find themselves faced with some unpleasant and unanticipated realities in their post-marriage lives. For example, women often greatly underestimate the costs involved in the divorce process itself. The website Divorcestatistics.info puts the average cost of a divorce in America at around $15,000.

Beyond the legal costs, things such as lack of financial literacy, standard office expenses, the need to hire valuation and other financial experts, and even the emotional states of the divorcing couple can contribute to the high price tag a divorce usually carries.

Divorcing women face other nasty surprises

• Health insurance costs are often more than they envisioned. Usually, divorced women will have to pay their health insurance premiums, which can be staggering. Nationally, health insurance premiums have been increasing by an average of 5% every year, for the last six years. In some states, coverage for a single woman can be more than $1,000 per month!
• They need to find a job as soon as they can. Economic necessity can mean that some divorced women will see they need to start working quickly. Those who were stay-at-home wives and mothers may not have had time to acquire new skill sets or update their existing skills, making it difficult to get hired or get better wages.
• They could find themselves homeless. In a typical divorce, the family home can be the most valuable financial asset as well as a big bone of contention. If divorcing women do want to stay in the home because they have young children or due to an emotional attachment, they may have to fight to keep it. Fighting with an ex-spouse over the home is an expensive and time-consuming process that could quickly deplete any savings and create even more stress.
• Alimony and/or child support is not what they thought it would be. For whatever reason, some divorced women overestimate how much money they feel their ex-spouse should pay in spousal or child support. The amounts arrived at during the divorce process may be much, much less than anticipated.

These and other unwelcome surprises in the aftermath of a divorce don’t have to spell disaster, though. With a little pro-active “divorce planning,” you can lessen the sting of the process and begin to regain control over your financial future.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or Register for Dave’s FREE Newsletter at 888-998-3463 or click this link: Dave Stanley Newsletter – Annuity.com Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Retirement planning for singles and unmarried couples

January 18, 20223-bottom, Citizen Journalism, Finances, How-To's, Local BusinessPlanning, retirement, singlesJoanne

By Dave Stanley
Integrity Financial Services, LLC

Retirement planning is crucial enough as it is for a married family. Still, it becomes even more critical for singles or unmarried couples considering that they are not accorded the same tax breaks and advantages which a couple gets upon marriage. Statistical studies report that single women are the fastest-growing group of home buyers, while the number of married families buying a house has dropped by 10% in the last ten years.

With increasing divorce rates and increased tolerance of non-traditional definitions of the concept of a family, the taxation laws have not been able to keep up with the growing purchasing power and numbers of people who fall into the definition of singles or unmarried couples, including divorcees, same-sex couples and singles living in an extended family with other members. What proactive financial planning steps can people who fall under these characterizations take to ensure a secure future?

If you live with a partner, the best thing you can do is be transparent about your finances and discuss all expenses and bills payable, to work out a satisfactory arrangement. This could mean a pooled fund for monthly payments and joint assets, while payments towards significant individual assets are paid for the owner(s).

Remember that there will be no legal recourse in case of a split and the asset not being in your name. If you have joint ownership of assets, contact a lawyer to put in writing arrangements for the distribution of assets in case of a split. A commonly availed arrangement for partners buying a home is under a JTWROS or joint tenants with the right of survivorship. A living trust can be set up to avoid the gift tax, which would be payable for transferring property to the surviving partner.

Funds in 401(k) plans, IRAs, and other retirement plan vehicles will not automatically be transferred to the survivor, as in the case of a spouse. Take special care to nominate your partner as the beneficiary and change as and when necessary if you are single. Write powers of attorney for each other, which would only come into effect in the sudden demise of one partner, or extreme disability. Note that unmarried couples do not have a right to each others’ social security benefits. IRA rollovers from one partner to the other are also taxable, unlike those for a married couple.

Also, laws governing rights over assets and responsibilities for joint debts may vary depending on the state of residence and the contracts signed with financial organizations.

All this means is that for single and unmarried live-in couples, retirement planning needs to be taken a bit further than that done by a married couple to offset the lack of clarity in governing laws and tax benefits. Everything has to be put down in writing in clear terms. It is generally advisable to consult a financial planner and set your finances to go in the right direction before jumping into a long-term live-in arrangement.

Financial Perspective: Time value of money

January 11, 20223-bottom, Finances, Local BusinessMoney, time, valueJoanne

By Dave Stanley
Integrity Financial Services, LLC

One of the fundamental financial concepts, the time value of money (TVM), says that the current value of a sum of money is worth more than the future value of that same amount. The principle of TVM comes from implicit costs, known as “opportunity costs.” It would be best if you evaluated when deciding whether it’s better to receive money now or take payments in the future. One way to think about opportunity costs is that they represent the value of what you stand to lose or possibly miss out on when you choose one possibility over another.

For example, a favorite uncle left you $100,000 in his will with the option to either take the whole sum now or get the money in equal payments over three years and receive an additional $500.00 for doing so.

For most of us, the instinctive choice is to take all the money right now and not wait three years to put it to use. By taking that money immediately, you can put it into an account that offers you continuous compounding interest that is likely to equal or exceed the $500.00 bonus you get for waiting. You could invest in an appreciating asset such as real estate or a cash-flowing business when you get the money right away. You might purchase stock with the potential to gain value or lock-in value with an annuity or life insurance policy. Because it provides immediate purchasing power, most people consider a present-day sum of money more valuable than a future sum.

Understanding the theory of the time value of money can help you avoid making costly mistakes with your money. You may one day face the decision to take a lump sum of money immediately or wait until later. Fortunately, there is an easy formula for the time value of money that takes the guesswork out of the decision. In this formula, the following variables are accounted for:

FV= Future value of money
PV= Present value of money
i=interest rate
n= number of compounding periods per year
t= number of years

Using the TVM formula, we can determine whether it would be wiser to accept the $100,000 from your uncle as a lump sum or in equal annual payments over three years along with the additional $500.

We have established that by not taking the lump sum, you stand to gain an additional $500. The question is, how much money could you earn over the three years if you were to receive the $100,000 and invest it today? Let’s say you take your $100,000 and invest it in a fund with an average annual rate of return of 6%. You want to know how much your investment will grow by the 3^rd year. To figure this out, input the variables, and you will be left with the future value of your investment for a particular year.

119,101.60=100,000 x (1+.06)³

As you can see, after the 3^rd year, your initial investment will have earned you an additional $19,101.60. Now that you know, taking the lump sum seems like a no-brainer.

If you are taking an active approach towards investing for retirement or other financial goals, do not be fooled by the allure of “free” money in return for splitting the sum into smaller payments. Carefully evaluate the pros and cons of each option while keeping in mind your own financial goals. Use the TVM formula, compare the potential gains and remember this; a dollar today is worth more than a dollar in the future.