FULL TRANSCRIPT – DIVORCE ETC… PODCAST

S4, EPISODE 11 – WHAT’S FAIR VS. ENOUGH IN DIVORCE?

Jessica: While it sucks to say sometimes it really is about the money, and by that I don’t mean how much you get necessarily, but being able to sleep at night knowing that your finances are in order and you can pay your bills. Our guest today says, “Divorce is like a roller coaster that you never wanted to ride and can’t wait to jump off.” I so agree. Money is one of the top concerns for women getting divorced. It’s exactly what we’re talking about on today’s episode of the Divorce etc… podcast. We’re the exEXPERTS, Jessica and T.H. We help you navigate your divorce and successfully move on with your life. Let’s bring in today’s guest.

T.H.: Hey guys, T.H. here from exEXPERTS. Jess and I are thrilled to introduce you to a new exEXPERT of ours. Her name is Kimberly Nelson. She’s a financial advisor, CFA, and CDFA out on the West Coast. She will tell you a little bit about her company and what she does. But we really brought her in because we, as you know if you’ve been listening to us, like people who are straightforward, tell you the way it is, and encourage you to pick up your big boy and girl pants. We will all help you find your way, but you have to show up for it. When it comes to money and life, let alone adding divorce into the mix, it’s a lot. Kimberly, we’re psyched to have you on Divorce etc… and help everybody figure out what’s fair and what’s enough when you’re going through a divorce.

Kimberly: Thank you so much T.H. and Jess, it’s just a pleasure to be here. I’m so thrilled to be having this conversation with you today because it’s such an important one. What’s fair and enough in terms of money and assets is one thing, but feeling the emotional justification, justice at the end of this whole thing is also very important. Sometimes it’s just the lens through which you view the way everything happened. You can make something that maybe felt unfair at the time feel more fair, or maybe something that was a little less than fair, it can still be enough depending on how you look at it and how you piece it all together. I’ve been a financial advisor for nearly 20 years based out of Los Angeles, California. I work with a lot of high net worth divorcees out here, in particular women who may not know exactly what is fair even given their marital assets. Oftentimes, they haven’t been included in a lot of these discussions and in a lot of the planning and whatnot. Trying to bring them up to speed, understand what they have, and understand what is fair, and then trying to make that enough for them post judgment is really what I do and what I love. I really have to just stop and thank the two of you for a moment for creating the podcast, creating the community that you have. It is serving so many people, women in particular. I can’t think of a more important time in life for this to be out there and available. We’ve all just been through COVID. It’s been a tough time. There are a lot of people reevaluating their lives. Money should never be a reason why someone stays in a relationship they don’t want to be in.

Jessica: We say that all the time. All the time. But the whole fair versus enough, I feel you really prompted that conversation in us several weeks ago. I feel everyone who’s listening, think about that for a minute, because life isn’t fair. Let’s be honest, life is not fair. But it doesn’t mean that what you get is enough. But the problem with so many people getting divorces, they get so bogged down in the bitterness that they’re like, “If I don’t get this or this,” then they’re pissed. They’re blocking themselves from realizing that it’s enough because they can take the control and take their own power to make sure that it’s enough. I feel not enough people do that.

T.H.: I think that people who are entangled in that emotional nightmare are more focused on not letting the other person have whatever, as opposed to really taking a look at what their needs are. They’re so entangled in “Well, he can’t have that,” “She shouldn’t have that,” as opposed to taking a step back. I just actually looked up the definition of the words enough and fair. The definition of the word enough is “as much or as many as required”. The word fair is “impartial and just without favoritism or discrimination”. If that kind of helps you, let’s start from there. This is the basic definition. Now let’s move forward. This is you reflecting on yourself for what’s enough and fair. Don’t worry about the other person in the negotiation. You need to take care of you. Then however it lands, that’s where Jessica and I can help with acceptance and moving forward.

Jessica: I just want to add in, Kimberly, before I ask you this question, the whole thing that I said in the intro about being able to sleep at night knowing that you can pay your bills, I mean, knowing what’s fair and enough, part of the problem is that not enough women have the financial literacy to, as you said, Kimberly, have been part of the dialogue in the conversations while they were married. They’re so worried that they’re not going to have enough that they get stuck in the hole of what’s fair. It’s legitimate if you’re worried that you can’t “afford” to get divorced. There’s financial infidelity, there are a lot of things that are going on—we’re going to get into that—but that’s what I wanted to ask you, Kimberly. The whole fair versus enough, you know that a lot of it stems from people just being worried because they don’t have all of the information.

Kimberly: Absolutely.

Jessica: How do you help them from the beginning? We are huge advocates of financial literacy, by the way.

Kimberly: So am I.

Jessica: We always tell people you have to educate yourself. You have to take the time to be able to learn what your finances are. The truth is you might be very pleasantly surprised about what’s enough. But how do you help them from the beginning when they come to you freaking out?

Kimberly: Yeah, absolutely. What’s tough too is that at this moment in time, when you’re trying to figure out what you have, what might be fair, how we make it enough, fair is really a tough concept because it implies a measurement in time, one moment in time. Divorce court is not really known for fairness, because fair is a static concept and exists at that particular moment. Our lives don’t occur at a single moment, and our lives are dynamic and ever changing. What may seem fair today doesn’t necessarily carry us to fair in the future. We have to assign a value to all the tangible assets of the marriage today. But how do we assign a value to opportunities going forward? That’s the really hard thing to measure. Step number one is we have to get our arms around what we know to be true. What are the assets right now of the marriage? What are the assets of each individual? Some of them might be separate assets. I come from the great state of California where it’s a community property state. There are many community property states—I think 17 of them in total. And so separate property, as long as it was maintained separately and it was never commingled, that’s pretty easy to keep separate. But what I think both parties have to also understand is that living standards will likely go down for both parties. That’s not fair, okay? You were married, you created a life for you and your children, and now everyone is probably going to be living a slightly lower lifestyle. We bring together all the assets of the marriage. We look at the marital balance sheet as providing our initial roadmap there. From that point, we begin negotiations to divide up the assets in an equitable fashion. Notice I didn’t say equal, okay? I said equitable.

Jessica: Can you explain the difference for people who really don’t know?

Kimberly: Absolutely. You bet. Yeah, equal would be same same, right? If you have 100 grand, he gets 50, she gets 50. But equitable is going to take into consideration a few intangibles. For example, let’s say that a couple has total assets of a million dollars, but 600,000 is actually home equity. They bought this house five years ago and they have a very preferential interest rate. We may not just divide assets 50/50, where they’re forced to sell the home to pull out the equity so that both parties can take their cash. It might make more sense to give one party a little bit more in the form of the illiquid home equity so that they can stay in the home and not have the greater expense of having to go find a new home at a much higher interest rate, or rent without any home equity, something like that. A 50/50 split is not usually the way it goes. It’s got to be something that both parties can live with, where each party’s priorities have been considered, and they each wind up with assets that mean the most to them and will help them move on the most with their life.

Jessica: I think one of the big problems though with a lot of, and I’m going to stereotype because it’s the truth, a lot of times, the husband, the man is the moneyed partner in divorce. I think part of the problem from a lot of women that I’ve spoken to is that okay, even if it was divided up equitably, they’re like, “Okay, but I haven’t worked in all of these years,” or “I’ve worked and I make $100,000 a year, and he makes $800,000 a year. If this was divided up equitably as of today, his future earnings are so much more.” Now they’re feeling like, well, that’s not really equitable because his standard of living won’t necessarily go down that much because he has so much opportunity to regain it all back.

Kimberly: Mm-hmm. And how unfair does that feel in the moment?

Jessica: Right?

Kimberly: To my point earlier, we’re assigning a value to tangible assets, and we’re splitting that. But when we think about equitable division for the future, opportunities and work histories, those are not equal, and there’s nothing we can do. There is no mandate from any judge that can make that equal. And so that’s a really hard thing. That’s where enough has to come in, because we’re going to try to divide things in a fair manner as fair as we can. If you’re settling, by the way, if you’re not going to court and you’re just settling, then fair probably means you’re about 70% happy, and your ex spouse should be about 70% happy too. It’s not going to feel 100%. It just never does. So that’s okay. But what you do wind up with then, we need to figure out how to make it enough to support your goals, what you want to do with your kids, what you want to do with your life, if you want to go back to work, do you need to go back to school, what needs to happen? To your point there, Jess, it usually is the woman in the partnership—if we have a husband/wife situation—but even with a husband/husband or a wife/wife situation, typically with high net worth partners, one of them works and the other one doesn’t. If they’ve been together for any length of time, the couple is just not served by the lesser earning spouse working. They’re better served by that spouse being at home handling the human equity at home and whatnot. It puts them in a very, very unfair disadvantage when we suddenly have a split, and now they are expected to go out and suddenly create their own standard of living and try to recreate that which they’ve been accustomed to with their spouse. That’s a really hard thing. That’s why working with your financial advisor, coming up with a financial plan, really identifying your goals that your time—which is your greatest resource, even above money, your time—that your time and your money are working toward those things to propel you up and up and up, when you don’t have the support of that spouse.

T.H.: We talk a lot about the fear around money. Right, nobody wants to look at it. People take a backseat because it’s just easier, right? “It’s not going to hurt me as much.” “Whatever, Kimberly, just take care of it, okay?” But that is not the way that you want to handle your life. Anybody who’s listening, if you want your life to look a certain way, and you want to do a certain number of things, then today is the day to start taking charge of your life. You are capable of learning whatever you want. You have the privilege of making choices. If you’re a stay at home mom and you’ve raised your kids and you’ve never worked, that is hugely daunting. But if you’re like, “Oh, I always wanted to travel,” I keep using this example, so if you’ve heard this before, I’m saying it again. “I’ve never worked, I love to travel. Oh, I can become a flight attendant.”

Jessica: Or a travel agent.

T.H.: Or a travel agent. But a flight attendant, and now I can travel. Now I can see the world and meet other people who also like to travel. Who cares if you’ve raised your kid? Lots of us have raised our kids at home. So we get it. Just align your interests, and then you can tap into what’s enough versus what’s fair for you. But you have to take a realistic look at your life, right? Where are you living now? Where are you going to live in five years? Are you staying in this house for five plus years? Rent versus buy, all of those things, I really want to address that. But I want to take one quick break here. Because when Jess and I were getting divorces from our exes, we hoped someone would take us by the hand and make sure we didn’t make any mistakes at all with our kids, our ex, our friends, dating, you name it. But you’re in luck. Just like building exEXPERTS for you, we also created a Divorce Rulebook. We share what we wish we knew back then so you don’t make the same mistakes we did. If you want your copy, all you have to do is visit www.exexperts.com. It’s right there for you. You don’t know what you don’t know, but the exEXPERTS do. So Kimberly, let’s dig into that.

Kimberly: Yeah, can I have you rephrase the question, T.H.?

Jessica: I was literally just myself like, dig into what? Dig into the Divorce Rulebook?

T.H.: If one of you could remember. I was on a roll here.

Kimberly: No, you were doing great. You were doing great.

T.H.: Okay, I’m talking about what’s fair and enough when you are a stay at home mom, and you’re not a moneyed spouse, and you’re starting from scratch, and all they’re looking at is your earning potential, and how important it really is to picture what your life is going to be, what’s realistic for you, and how critical that is to do to determine what’s fair and enough in negotiating your future.

Jessica: Yeah.

Kimberly: Mm-hmm. Yeah, I mean, that’s a really great place to start too, and it’s something you have a lot of control over. That’s the greatest part about your spending, and to a certain extent, your income. But mostly your spending and your priorities, you do have a lot of control over that. So starting with your—I’m going to say it, it’s not a four letter word, but it might as well be—budget. Okay, no one likes to talk about budget. It is a four letter word. But seeing where your money is going, number one, is going to help you understand where you’re getting the most value—number two—from your dollars. I’ve got a great spreadsheet for budgeting, actually. If anybody wants that they can get—

Jessica: Yeah, yeah, yeah, share that with us, and we’ll share it with everyone.

Kimberly: Yeah, I’ll share that with you. The reason why it’s so great is because I’ve thought of a lot of different categories that I think a lot of people don’t think about, especially when they’re in this place of stress with their divorce. But there are two columns: there’s one for your actual spending right now, and then one for your projected spending in your new life, because housing expenses could change, kid expenses could change based on custody, pet expenses could change, lots of things can change. The first thing that we do is we get educated about where our money’s going. That’s just step number one. There’s nothing right or wrong about that.

Jessica: No, I was going to say, the budget thing, we know that everybody hates it. But I just always have to emphasize the not knowing can kill you. Literally, the stress and the fear and the anxiety and the lack of sleep over not knowing what the details are, that is what’s going to kill you. Once you know, you might be super stressed and anxious and not be able to sleep, but at least now you know what the situation is, and you can go out and fix it. If you don’t know and you’re in a bad spot, like, no bueno.

Kimberly: Yeah.

T.H.: The fear of the unknown all around is what will eat you alive. That’s what was eating us alive, whether we were aware of it or not, with our husbands. Whatever you’re living in doubt about and making up your own stories in your head is a little bit delusional. It’s never going to lead you down a safe path. So face the facts. We’re right here with you. And then move forward.

Jessica: Yeah.

Kimberly: Well said. You’re absolutely right. I think that uncertainty is probably the worst thing for the human psyche. There’s a lot of uncertainty during the divorce process. Once you start to remove some of that uncertainty from the table, not only are you going to be sleeping better at night and you’re going to be a little less stressed, but you’re going to actually feel empowered. I think you’re going to be excited about—

Jessica: Right, you’re going to be in control of your own situation. That’s right. When you have people that come to you, let’s say they actually have gotten to a point where they’re like, okay, it might not be that fair, but it’s enough. But it’s not really enough, because neither side is going to have enough in a scenario, right? What are some ways that you are able to help them for the planning, moving forward, so that they can whatever, grow their money, figure out different investments, figure out ways to be able to make ends meet? That’s the scariest part.

Kimberly: Absolutely. I mean, post divorce, once the settlement is all done and you have what you have, again, hopefully, it was fair. Even if it was unfair, how do we turn that into enough? Once we figure out your spending and your budget, we take a look at your income, what’s coming in to you each month, and it comes from three different sources potentially. There could be earned income if you are working, or if that’s your aspiration is to work. It could be coming in alimony from the divorce settlement. But the third one and my favorite one is the assets that you retain. What can we do with those assets to turn them into an income producing machine for you so that your money is getting up and working nine to five, just as you are? What we do is we take a holistic look at your entire universe here, your universe of assets. We talk a lot about your goals: what you want to do, are you going to help support your kids through college, what was your alimony arrangement? All of this, we take it and we put it through a system called Monte Carlo. I’m not talking about the—

Jessica: That sounds very fancy.

Kimberly: It sounds very fancy. What it is, is it’s really simple, but we take about 1000 iterations of market returns and we come up with a confidence interval of how likely we are to actually meet those goals. It’s all very technical.

Jessica: Oh, like an algorithm?

Kimberly: It’s like an algorithm. It’s like an equation. Yeah, economists, I tell you, what they’ve come up with, with equations, what they can do is amazing. But what we do is we then come back into an asset allocation with your assets to try to create an income stream that is tax efficient, sustainable, and reliable. If there’s some kind of discrepancy between your budget and what your earned income, alimony, and portfolio can provide, then we just have a reconciliation discussion. We talk about how we could possibly earn more money, ways to do that, or possibly cutting back on that spending plan and seeing where you’re not getting the greatest value in terms of that spending, and where we could cut things a little bit. In the beginning, it can be a little bit of a daunting task. But once you start moving through it and you’re doing it, it becomes easier and easier. Again, budgeting, how much do you need to live your best life, we figure that out. Then we back into the asset allocation with the asset base and your goals.

Jessica: Let me ask you, how often do you have to have a conversation with your clients—

Kimberly: That’s a good question.

Jessica: —where you’re like, “You need to reassess the amount of money that you’re spending every month because you are going out to dinner too much, or you’re shopping too much.”? Is that a frequent conversation? Or not really?

Kimberly: I would say it’s not really. The reconciliation discussion, those are not too harsh, I’ve found. I think that when women especially get divorced and they are starting to spend, starting to budget and whatnot, they find that it’s actually quite easy to live within the boundaries that we set through the financial planning. It’s just that no one’s ever told them before what they can spend. Okay, a lot of times—

Jessica: Because no one wants to be on an allowance by their husband or by their spouse.

Kimberly: Definitely not. Nobody wants that. Absolutely not. I don’t necessarily put people on an allowance either. We talk about a few different things that can work and a few different levers we can pull to make that work. But I find that people are really able to live within boundaries, as long as those boundaries have been set. When they come through their divorce and out on the other side, no one’s actually had a conversation with him about what they should reasonably expect. When we start those conversations during the divorce process and start to talk about what they can reasonably expect, as we can see the assets that are being discussed in the divorce, we can start to set that expectation. Then this is not as big of a shock to the system when they come out on the other end.

Jessica: I think that’s really helpful for everyone to hear who’s listening, because this is the whole thing that we keep telling you, if you’re having the dialogue and the conversation and you are a part of your own process and you’re moving forward, then you actually can make it work within the realm of your own reality. It doesn’t have to be scary. It doesn’t have to be a shock to the system. T.H. you were going to say something?

T.H.: I think the key is that you have a partner who knows better than you. You’re not out here figuring it out on your own. The whole point is that having a financial adviser like Kimberly—like, this is her job. This wasn’t my job. It’s not Jessica’s job. We’re not an expert at that level. But that’s why you align with someone who is. Honestly, of all the people that I carried on a relationship with—in a platonic professional way—after my divorce was my forensic accountant because he kept me in check. He kept me in check with my divorce terms, my alimony, what I can write off, how all of that works. I implore all of you that if you are currently in the process of your divorce, start learning now. Don’t wait until the divorce is over. Because then you’re going to be like, “Wait, Kimberly, what did you tell me in the middle six months ago? I don’t really remember.” 

Jessica: Also, you don’t want to end your process in debt and with bills that you really aren’t going to be able to afford, with whatever it is that you are going to get out of it at the end.

T.H.: I think that having a partner like Kimberly keeps you accountable, right? Just think about like going on a diet, right? I become accountable when I start actually writing down what I’m eating all day long. If I just leave it up in the cloud, “Oh, my God, I didn’t have four cookies.”

Jessica: You forget that you had that piece of cake.

T.H.: No, I know. I’m just saying it’s like it didn’t happen. No one saw it. No one wrote it down. No one saw me get my nails done. No one saw me get that extra smoothie at Starbucks for $10 or whatever. You’re not accountable. When you have a partner, the same thing, “I’m not going to the gym.” But if you have a partner, then you better freaking show up because somebody’s looking for you.

Jessica: That’s right.

T.H.: So having a partner through this will make it less daunting. You will learn a lot. Then you’re going to be like, “Oh, my God, look at me. I can freaking go to dinner because I saved this money,” and it’s even sweeter—

Jessica: It’s so gratifying.

T.H.: —when you’re taking charge of your life.

Jessica: Yeah.

T.H.: Or you don’t go to dinner, and then next month you’re like, “My credit card’s 200 bucks. Like, look at me!” Then when you’re accountable, you start to see your success. If you’re not accountable to yourself with a partner or on your own, you’re never going to see the successful potential that you have in managing your money, staying on the diet, showing up for the gym, saving on your credit card, all of the things. But money is everything, right? You can’t do anything without money.

Jessica: It is. It is. I mean, it’s like money can’t make you happy, but money does make the world go round.

Kimberly: You can rent it for a little while, right?

T.H.: It gives you food, a house, clothing. It gives you everything. So if you’re going to take control of anything, it better be the money.

Kimberly: Absolutely. I’ll tell you too, what’s fair in your divorce is negotiated by your attorney, with your ex’s attorney, or the judge if you’re going to trial, okay? What’s enough is negotiated with me, with your financial advisor. At no point does your ex have a say in any of this. None of this is negotiated with him. This whole concept of fair and enough really came about because those are the two words I hear most often, my clients, as they’re going through a divorce. They say that “My ex keeps saying but this is fair. Why don’t I see it that way?” or “This is enough for you. You don’t need more than that. This is enough. Just sign this deal so we can move on.” It’s not up to your ex what’s fair or enough. There’s an equation for what’s fair, and there’s a process for what’s enough, and neither of them involve him or her—your ex, depending on who it is.

T.H.: That’s a clippable moment, by the way.

Jessica: Yeah, no, I love that.

T.H.: Everyone needs to hear that right there.

Jessica: Totally, totally.

T.H.: But fair and enough took some time for me to really think about. Kimberly and I have been talking about it for a while. I was like, “God, I don’t know what’s fair and what’s enough.” I think also, like I said earlier, the minute you take your ex out of the equation and you just look at your own future, your ex is going to do whatever your ex is going to do.

Jessica: Right, you can’t control that.

T.H.: So, as long as you have the money that you need to sustain the things that you need based on earning potential, and job, and employment, and all of the factors, that’s the lane you really need to stay in. The minute you really start looking, “Well, he’s going on fancy vacations, and I can’t even go for a night in a hotel. He’s driving this car and he’s got a new girlfriend and she’s got jewelry all over, and I had to hawk all my stuff.” Stay in your lane because all of that other stuff is noise. When you work with somebody like Kimberly and a financial advisor, you will still feel fully rewarded for everything that you have. Don’t worry about anybody else, and certainly don’t worry about your ex.

Jessica: I love that. I love that.

Kimberly: Yeah, that’s great. Absolutely.

Jessica: Well, Kimberly, thank you so much for all of the important information. I mean, we really do feel the money aspect, the financial side of divorce, we know how scary it is. But it’s one of the things that is worth talking about the most.

Kimberly: Absolutely.

Jessica: Because that’s the comfort level that people need to get. And so we really appreciate you giving us all of your tips.

Kimberly: Well, thank you both.

Jessica: Thank you.

T.H.: Wait, I want to say one more quick thing about going to court. Because I was four years preparing for trial—we’d gone through fair enough, enough, fair, asset, not an asset, equitable, equal, all of the things. I will tell you that the minute we would have crossed into that courtroom, nothing I said mattered anymore. Nothing he was going to say mattered anymore. It was never going to be enough. It was never going to be fair because now you have a person who knows nothing about you going by the law.

Kimberly: Yup.

Jessica: Right, right.

T.H.: Your circumstances and all of this stuff you just spent all this time and money working through and discovering becomes really irrelevant.

Kimberly: So true.

T.H.: I’m telling you it was not my choice, but really take everything you can from your separation process before you file, because you don’t want to lose control. You don’t want to lose control of your destiny.

Kimberly: Mm-hmm. Something that I would say is even worse than trying to work out an agreement with your ex spouse is allowing, like you said, a total stranger to slam down a gavel and make a decision about you, your life, your ex’s life, your kid’s life. He just met you that morning, and now he’s going to decide everything. There’s something so detestable about that, that it almost makes you want to run right back to the settlement room and just work it out with your ex. Because the thought of a stranger having that kind of power over you is even worse than the idea of just trying to compromise with someone that you don’t want to compromise with.

T.H.: One of our top podcasts is tips on settlement negotiations, and that is something you all really should go back and listen to on Divorce etc… because it does relate to this. It does relate to the importance of a financial advisor, and it does offer you tips on how to even negotiate in the most contentious divorces so that you still are able to control your destiny to a certain degree. So, thank you so much Kimberly.

Jessica: Thank you Kimberly. For everyone out there, if you’ve enjoyed this episode of the Divorce etc… podcast with the exEXPERTS today, then please let us know by taking a moment to subscribe, rate, and review. That helps us out and it helps others going through divorce to find us and the resources they need. For more information about Kimberly and how she can help you, check out the show notes. And of course, share this episode with anyone you know who can benefit from listening. Have a great day.