They were in love. They were also in denial. How two FOF women straightened out their financial lives after their marriages went kaput.

Shelly’s FOF Client: 50, married to a physician for 20 years. When they married, she had a growing career in sales, making high five-figure income. He was just finishing his medical residency as a thoracic surgeon. They decided to set up his practice in Fort Myers, Florida. Along the way he told her “it's important to me that you stop working when we have children.” That’s just what she did.

Fast forward to now--20 years later. The husband receives more than half a million dollars a year from a trust fund, in addition to his income as a physician. All the while, they’ve been very inattentive to saving. Something was always coming in because of this trust fund, so they didn't have to deal with it. They had this attitude that money will always be there; we don't have to do the traditional planning that everybody else has to do relative to saving for retirement.

Now they’re divorcing and they have no assets, except a house they built a few years ago. All they have is his trust fund. There’s nothing to split.

They have two children, a twin girl and boy, sophomores in private school.

• FOF: Is he still practicing?
  • SC: He's practicing part time. He has a health condition that has limited his workload in the past. He could work more than he does, but isn’t motivated, given his substantial recurring trust revenue. Plus, why should he work more now, when it will only mean a larger alimony payment for his soon-to-be ex-wife.
• FOF: And she didn't know about their finances?
  • SC: No, she knew it. She was ignoring it as well. They weren't saving, they were both spending and they had a very nice lifestyle. And now, when she's not in love with him anymore and she's ready to move on with her life, she's at a loss because the house is all they have. She has no career at fifty and is scared to death about her financial future, especially given this horrible job market.
• FOF: What happens next?
  • SC: She has no right to his trust money. He will have to provide her some sort of support, but if he keels over tomorrow, she has absolutely nothing. His trust would go to their children if he died.
  • So now she's sitting here thinking that she gave up a lot, she was his wife, she helped him build his practice. But what does she have now? And because of his past medical issues, he may not have a long life and then she’ll have nothing.
  • Besides, the income from his trust fund is really not enough to support their lifestyles.
• FOF: Wasn't there a half-a-million-dollar income from his trust fund?
  • SC: Yes, it still doesn't cover everything.
• FOF: Did they live that high?
  • SC: Well they have the $3 million house, with huge carrying costs
• FOF: What is she going to do?
  • SC: That's the magic question. She has to come up with a way to supplement the income she gets from him. She knows she will have to go back to work.
  • I’ve advised her that she shouldn’t make any major decisions for six months, until she is physically out of the house and the divorce is final. I give that advice to all clients going through a divorce as they are usually on an emotional roller coaster and should only make those decisions that absolutely have to be made.
• FOF: Are they going to sell the house?
  • SC: Yes, but the market is so bad right now that they'll be lucky to break even. Then she’s going to have to rent.
• FOF: What else do you advise?
  • SC: Right now I want her to research her job options. She got her college degree in physical therapy, so she’d need to get recertified if she pursues that field. She's also a great party planner and could easily make a business out of it (although it probably is not a high income business).
• FOF: Has she thought anywhere along the line now that, oh God, maybe she shouldn't get a divorce because it'll be too hard?
  • SC: Yes, she has. However, she absolutely believes this is what she wants. She’s been in a loveless marriage for several years. She knows financially it's going to be a struggle for her but she knows emotionally it's the right thing to do.
• FOF: Since there will be assets after the house is sold, what will you advise?
  • SC: The first step is getting her arms around her expenses because that's the most crucial thing and that's the one thing that most people ignore. When I ask people at all different ages how much money they spend every month, nine out of ten always underestimate what they actually spend.
• FOF: That's so interesting.
  • SC: Yes. People always underestimate it. And when they start writing it out and putting it on a piece of paper, it freaks them out.
• FOF: Why do you think women avoid the subject of expenses?
  • SC: I think it’s just easier that way. If people put their heads in the sand, it's not a problem. It's so bizarre. Bright, educated women get themselves in this situation.
  • Many women think the husband's job is managing the finances. Make the money and manage the money. A lot of it goes back to our childhood and our upbringing because many of our mothers weren’t involved with money at all and didn't even know what their husbands had.

Shelly’s FOF Client #2

• FOF: Is it the same for a woman who has an independent career and gets a divorce and doesn't know what she has or doesn't have because she's not paying attention to it.
  • SC: Absolutely, absolutely, that's exactly correct. I see that a lot. I have a situation where a client—she’s a 52-year-old physician—was so busy handling her patients she just didn't deal with the investment stuff and she got caught when she went through a divorce four years ago.
• FOF: What happened with her?
  • SC: Her husband was a much lower wage earner, and she didn't want him to feel any less of a person, so she went and transferred the home that she had bought with her pre-marital earnings into joint ownership. Then she set up a joint checking account and she started depositing her income into it so it became a joint asset for them. She had children with this man and it was important to her that the children could look up to him as the dad.
• FOF: Do you suppose she wanted to alleviate her guilt for earning more?
  • SC: Certainly.
• FOF: Are we as women so dumb financially?
  • SC: We're emotional creatures and we make many decisions with our hearts, not with our heads. Men generally make decisions with their heads. Even when I work with couples as clients, the decision process on their investments is very different for each.
• FOF: How did the husband feel?
  • SC: Oh, he just absolutely ate it all up and went for it. During the period from their marriage to the divorce, which was barely over seven years, her investment assets and her business shot up in value. And, unfortunately for her, he got a big chunk of that. He basically came into the marriage with debt and left with assets valued over seven figures. The sad thing about the whole situation? He wanted the divorce. She was devastated! It’s been four years since the divorce and she’s still not over it emotionally.
• FOF: Did she know the value of her assets before the divorce proceedings started?
  • SC: She did to some degree, but not as much as she should have. That’s typical with professionals. They have busy lives so they don't pay attention to their finances.
  • Now she has to rebuild. Plus, she has to pay him alimony.
• FOF: He had no income?
  • SC: He had substantially less income than her, so she had to pay him alimony based upon a formula the State of Florida uses in calculating child support and alimony and length of marriage, etc.
• FOF: Do they have kids?
  • SC: They have a 10-year-old son.
• FOF: Now what does she do?
  • SC: So mistakes made, deal is done, the first thing I recommended was for her to meet with her attorney to get her estate planning in order.
  • I wanted her to make sure that she had her remaining assets in trust to protect her minor children. She also had to name a guardian for her children if something were to happen to her. Obviously, she doesn’t want her ex-husband to have access to anything else. Along those lines, we make sure all the beneficiary information on her assets is correct. Originally, her husband was the primary beneficiary on everything.
• FOF: Did she have many assets after she gave him $1 million?
  • SC: Yes, but she had to come up with a lot of cash to pay him off so her cash position has changed. She had money invested and income, because she’s a doctor.
• FOF: And she had a house, I assume?
  • SC: Yes, she kept the marital home.
• FOF: It was fortunate that she still had earnings.
  • SC: Right. She had the ability to correct the situation. After I had her meet with her attorney to take care of the kid’s trust fund, the beneficiary and guardianship issues, I sat down with her to look at all her assets, budget, income, expenses. What would she need to live on and how much could she start investing each month to rebuild her nest egg? The other priority was making sure that there was an education fund for the kids, since she was responsible for paying for all of that.
• FOF: Where did you advise that she put her money?
  • SC: I wanted her to first build up a cash reserve because so much of her cash was gone. She was somewhat debt adverse, but in order to finish paying her ex-husband the $1 million, I had her take out a small first mortgage on the house so that we could consolidate everything. That also allowed her to expense mortgage payment.
  • She was able to maintain her biggest asset, her 401K. So I did some analysis for her, assuming retirement at different ages, and determined how much she needed to be putting away each year. Then we set her on a path to start focusing on that. She's one of those individuals, fortunately, that when you give her a goal, she gets it done.
• FOF: How is she doing now?
  • SC: Financially she's doing fabulous. Emotionally, I think she's still very wounded.
  • She has no debt, everything is paid off, she’s focused on her business again. She was trying to be a mom, a doctor and a wife, and so she got to where she was working two and a half days a week. Now she’s back working five days a week because her son is in school. She is very focused on her practice.
• FOF: What made her come to you? Tell me why a woman should come to you.
  • SC: First of all, I have a very good reputation in this town. My integrity is very well known. I also have a reputation of working with divorce attorneys. So I'm well known for that, which is a specialty of mine.
• FOF: Did you decide to concentrate on divorce early on?
  • SC: Well no, it started with my own divorce 14 years ago. The attorney who represented me was impressed that I had my finances so organized. She said she could use my help working with other clients. It’s turned out to get a great niche and I love it. You have to have tremendous patience to work with these women. And you have to be able to deal with the emotions because it goes from one extreme to the other.
• FOF: Do the divorce attorneys you work with represent the women generally?
  • SC: I would say 90 percent of the time I get the female side of it. I do get men on occasion, but mostly it's women.
• FOF: Do you feel women are better served with a woman financial advisor than with a man?
  • SC: I used to think it didn’t matter, but what I'm finding is females relate better to females. I also think that I'm as successful working with this type of client is because she’s been burned by a man and isn’t real crazy about going back to work with a man in any capacity (at least not right away).
  • When women, particularly, go through something like this, they become emotionally frozen. They can't make decisions because they're so emotionally tied up with the fact that they've been left or they feel like they're not successful because they don't have a husband now.
  • It's crucial to work with somebody who can help you sort through everything and get you focused back where you need to be. That probably is the biggest value I add. That, plus trust. It's very hard to quantify that. It has a different value to different people.
• FOF: But you’d still take a woman as a client who wasn’t getting a divorce?
  • SC: Oh, yes, we have lots of couples that are clients. A husband might come to me because he wants to make sure someone is there to take care of his wife if he dies first, especially if she hasn't been financially astute.

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