Douglas Goldstein: Peter Dunn is known as “Pete the Planner.”
He is an award winning comedian and financial writer.
I want to talk to you about some of the topics you’ve written and spoken about which are
the financial aspects of divorce.
If you are soon to be ex, the one who used to handle the money and now you have to start
taking over it, how do you deal with that especially if you really don’t have a lot
of experience in household finance?
Peter Dunn: I got to think to begin with realizing that it is a fresh start and so the old way
of doing things may have been good, they may have been bad but now you get to weigh in
a little more which by the way I think in any relationship both people should be highly
involved with the finances, not out of fear that you could someday get divorced because
I think it’s just better for the relationship.
People list money as one of the most intimate things in their lives and if that’s the
case, I want to make sure I’m on the same page as my partner both before the relationship
ends and after the relationship ends.
Douglas Goldstein: In the event that you can’t, what are some of the mistakes that you see
people make that maybe by listening to us here today, they couldn’t not make them
if they end up in a separation?
Peter Dunn: I think people when life gets abnormal and when stress comes via a divorce,
people try to hang their hat on the idea of keeping things as they were.
They say “If I can’t be comfortable personally and socially and all those sorts of things,
at least I want to have the same things I’ve always had.”
I think that’s the biggest mistake.
I think the biggest iteration of that is when someone fights to keep the house, that they’re
the one that wants to stay in the family home and anecdotally what I see is the wrong person
fights to keep the home and I’ve had a divorce lawyers tell me for years one of the worst
things you can do in a divorce is to fight to keep the home because it’s something
that creates such a huge financial burden when a household incomes splits into two.
Douglas Goldstein: You’re saying that when someone gets divorce here she thinks “I
really want to keep the house for whatever reason” probably because they think it’s
very valuable, but really maintaining is just so difficult?
Peter Dunn: They want to keep the house for all sorts of reasons.
Like you said we raised our kids there, I need a place to sort of anchor my feelings
and thoughts, I don’t want to both get divorced, have to get a job and move to a new place.
So it seems practical to try to stay where you’re at and financially, many times the
math doesn’t work if the household income divides then there’s a pretty good chance
that from percentage standpoint, the expenditures going towards housing, again depending how
the incomes split up could double.
I mean you could be spending 50% of your income to try to maintain your housing versus doing
what’s right and cutting that close to 25% to 30% of take home pay.
Douglas Goldstein: Let’s say that you’ve got a portfolio of stocks and bonds together
with your spouse and then you split up, what would be some considerations people should
think about in dividing that money?
Peter Dunn: I think that’s where good attorneys has come into play as well because it can
be the give and take, “I’d rather have this and you’d rather have that.”
I have found though that usually one party is disengaged from the investing part of life.
You may have one person that handles the day to day but the other person handles the investment,
so it’s the person that does not handle the investments that needs good counsel because
they don’t know what they’re giving up and if they get stock with the bad part of
the portfolio or if they get stuck with an account that the person that knows says “You
know what you go ahead and just take that account.”
Meanwhile, the things under water and not worth much, that’s where good counsel comes
into play but I don’t know about you, I rarely see two people that are highly engaged
in the inner workings of their investments.
Douglas Goldstein: A lot of times we’ll tell someone when you receive an inheritance
unless there’s something urgent to do, the first thing you should do is nothing because
people that are under a lot of stress because of the lost and then they end up making bad
decisions but in the divorce, you can’t do that.
How do you recommend people make smart decisions even when they are under such great stress?
Peter Dunn: I see people make permanent decisions with temporary issues.
So you’ll see someone buy a house right away instead of renting for six months to
get some clarity.
I think there’s a way to do nothing without doing nothing and I think not making permanent
decisions when you don’t have to is a good way to go.
I don’t know, I’ve always believed that renting has its place and a lot of people
don’t feel that way.
I just think it does and I think if you can find a month to month or a six-month lease
that allows you to restructure your life and get back on your feet then it takes the emotion
out of it.
I’ve always felt that money magnifies who you are.
So whether you get an inheritance or you received an inheritance or you have now less money
because of a divorce to work with on a monthly basis, your personality is really going to
come out and so I think if that is in fact true, you got to give yourself some room to
fill out your new expenses and I think jumping right back into home ownership or committing
to two new monthly obligations is a big challenge which is hard to overcome.
Douglas Goldstein: Tell me about some of the health insurance issues that people have to
be concerned with when they get divorce.
Peter Dunn: There are a lot of issues there.
I’ve seen it goes down a lot of different ways.
You can have some exceptions here and there but ultimately one person has to split off
the other person’s policy and if the person that splits off is not employed then you have
to go sort of to the public marketplace to find health insurance which can be a lot more
expensive than health insurance that subsidized by an employer and to your point, that’s
one of the true forgotten expenses that is incurred when two households come from one.
Douglas Goldstein: There are also things like life insurance or disability insurance.
How should people deal with that?
Peter Dunn: I think the first part is that many people turn is to change their beneficiary.
That’s a tough one especially if children are involved.
Ultimately, whatever disagreement or whatever cause the divorce, most folks still wants
best for their offspring and so at times, it could make sense to create a trust as the
beneficiary of a life insurance contract instead of the person you just divorced.
I see that quite often but again I think a lot of this has to do with is it a two-income
household or is it a one-income household.
This conversation gets incredibly difficult when you take a one-income household then
the other person has to go out and begin a career from scratch and maybe sometimes they
haven’t been in the workforce for a decade or more.
Douglas Goldstein: Today, most people don’t have to worry about paying an estate tax.
What are the estate planning issues that they should be considering if they’re no longer
married?
Peter Dunn: We don’t dive too deep into the estate planning issues here in our shop
in terms of divorce but it often becomes an extension of the legal work they’re doing
with what are now called relationship transition.
So that’s going to be probably be an extension of what they’re doing to make all the I’s
are dotted
and T’s are crossed.
Douglas Goldstein: How can people follow you and follow your work?
Peter Dunn: www.petetheplanner.com and of course @PeteThePlanner on Twitter.
We’ve got a new book coming out the end of this year and so just keep abreast as to
what’s happening.