LINDA
CASE STUDY #1*
AGE: 52
Linda’s Challenge
Linda was scared and confused. She needed help understanding her current financial position and how divorce would impact her financial future.
Our Approach
Linda needed help setting up a budget and getting a better feel for her assets and debts. During her 24-year marriage, her husband took care of the finances. Linda never tracked her monthly spending and didn’t know where to start when it came to understanding how much money she would need as a single person. We were able to help Linda in 4 key areas:
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Clarify Expenses. The first step in helping Linda get clarity around her budget was to go through our expense worksheet line by line. We categorized her spending into six main areas using ballpark figures to avoid adding undue stress. Then we used her mortgage, credit card, and bank statements to fill in the remaining gaps.
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Project Spending. We were then able to project what Linda’s spending would be as a single person post-divorce. It turned out to be roughly $8,000 a month excluding a mortgage payment.
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Retirement Income. The next step was to estimate how long Linda’s money would last during retirement. We analyzed how much income might come from her share of retirement savings. We also explained to Linda how she would be able to claim based on her ex-husband’s Social Security record, having been married more than 10 years. We also worked with Linda’s attorney to bolster her argument for spousal support.
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The House. Linda’s desire was to keep the family home. However, she didn’t know if she would be able to afford it after the divorce.
The Results
With our help, working with Linda’s attorney, Linda was able to get a divorce that established a strong financial foundation for her future. For example, our budget exercise gave her the information and confidence she needed to request that her mortgage and car loan be paid off prior to dividing other assets. This helped reduce Linda’s monthly expenses and allowed her to save more toward retirement.
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Get organized. We gave Linda a checklist of documents to gather to have a complete inventory of all of the family assets, liabilities, and income sources.
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Understand retirement. We explained the rules governing the division and distributions of 401(k) assets. Since Linda was under the age of 59½ we helped her avoid tax and penalty by taking a distribution that was transferred to an account in her name instead of a withdrawal.
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Analyze her housing. Linda was interested in keeping the family home. With our help she was able to see whether giving up some cash or retirement assets for home equity made sense. With our help, she felt confident keeping the house.
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Understand income replacement. Linda’s husband had a much higher income, so alimony played an important part of her overall financial plan. We also helped her with a contingency plan in the case of his unexpected death.
*This is a hypothetical case study.