(979) 324.8179
Location
Contact
Menu

Tracy Stewart, CPA

Just another WordPress site

Peace of mind through financial clarity.

Do’s and Don’ts for Boomers Living in Sin

by Leave a Comment

canstockphoto15145120 Senior Couple on beachAfter a divorce, many Baby Boomers swear they will never marry again. Then they fall in love. In a previous post, Boomers: In your next relationship just shack up, I listed the financial incentives that are fueling the surge in seniors shacking up together. In this post, I will share tips on how to handle your finances when living in sin.

 

Share Household Expenses? Definitely

Many divorces are sparked by the inability to talk openly about money. In your post-divorce relationship, don’t fall into the same trap that got you into that divorce. Make it a priority to go over the money situation once a month. Share the household expenses equally or proportionately based on your respective incomes. Here’s where that joint account comes in handy to pay the bills. You each deposit your share of money to cover expenses and pay for them out of the joint account.

When I say “household expenses”, I am not talking about improvements to the house; fund those by the person who owns the house. Sharing in the cost of remodeling or major repairs can get complicated when one of you passes away first without clearly covering this situation in the estate planning documents. Again, I can refer you to excellent estate planning attorneys in the Brazos Valley.

Mingle Assets & Debt? Nope

When shacking up together, retain separate checking accounts. One joint account is fine as long as you also have your separate account. Do not apply for a joint credit card. Do not comingle debt.

Do not contribute toward the purchase of a major asset that is titled to your partner. Talking about houses, vehicles, boats, airplanes and investment accounts. Ok, if you just have to contribute, be sure your name is also on the title. If you are leasing an abode, get both your names on that lease. No exceptions. Consult with an estate planning attorney. Ask me for the best ones in the Brazos Valley. Do not get yourself into the pickle of co-owning a house with your partner’s mother after your partner tragically and suddenly drops off the perch.

Get a No-Nup? Yep

Ok, it might not be romantic, but get a no-nup anyway. This is a legal document that addresses property division, financial support and debt planning for the possibility that your relationship ends prior to either of you passing on. You want to be clear what will happen to your assets if and when the relationship ends. It is not a DIY project. You will need a family law attorney, so call me if you want recommendations.

 

Boomers: In your next relationship just shack up

by Leave a Comment

 

canstockphoto22699599 Happy Older Couple In Park

It used to be called living in sin. It is now socially acceptable and growing by leaps and bounds among boomers. Shacking up is a popular alternative to marriage and divorce, even a nice collaborative divorce. Older people are living together for an average of nine years. Financial reasons top the list of incentives.

Loss of Income. Alimony usually stops when the recipient marries. If you have survivor’s pension benefits, you might lose those if you remarry. If you are receiving a share of your late or former spouse’s Social Security benefits, you could lose those benefits if you remarry before your 60th birthday. If you remarry after age 60 (age 50 if you are disabled), you can collect benefits on your former spouse’s record.

Potential Financial Burdens. In Texas, both spouses are on the hook for most debts incurred during the marriage, regardless of who incurred the debt. Then there is the cost of nursing homes at $5,000 a month in the Bryan College Station area. As a married couple, such costs can devastate the surviving spouse’s financial security.

Tax Disincentives. If each of you has income, as a married couple you could be thrown into a higher tax bracket. As singles living together, you each get $3,000 of capital losses to offset ordinary income, which results in an offset of $6,000 over the two tax returns. As a married couple filing with a joint tax return, you two would only get $3,000 to offset.

Estate Planning Risks. Protecting their children’s inheritance is a big reason Baby Boomers opt to cohabitate. Assure yourself and your heirs that their inheritance will remain intact. Visit with an estate planning attorney before you move in together. Contact me if you need a recommendation for an excellent estate planning attorney in the Brazos Valley.

In my next blog, I’ll give you tips for what to do and what not to do when shacking up. Do’s and Don’ts for Boomers Living in Sin

 

Why Collaborative Law Divorces Save You Time, Money and Hassle

by Leave a Comment

canstockphoto9418132 Y cube

The collaborative law divorce process is the preferred process of educated couples seeking divorce. Like you, they want to save time, money and hassle. These couples like the benefit of being able to make decisions with the help of experienced collaborative professionals. These couples like being in control.

Collaborative couples don’t have to wait for lawyer responses or court dates. They can wind up their divorce at their own pace. When they have obligations in their “real” lives, they can schedule team meetings around those events. Their professional team works around the couple’s schedules instead of the court dictating their schedules.

Most collaborative alumni tell me they are now communicating better than when they were married. This is because they selected a Mental Health Professional for their team who taught them how to effectively communicate as co-parents.

Collaborative couples select a single neutral CPA who understands their financial situation. The neutral financial professional analyzes the finances to maximize how the redesigned family will cover the children’s expenses and spousal support. The collaboratively trained CPA helps the couple decide how to stretch their limited funds to benefit the entire family.

If you would like to learn more about collaborative law divorce options in Bryan/College Station, just let me know.

How Do I Become Financially Independent?

by Leave a Comment

You are financially independent when your property generates enough income for you to have leftover money at the end of each month. How long can you keep up your standard of living without earning another paycheck?  Achieving this goal takes determination, stamina and a little bit of luck.

Make it your priority

Just like any goal, if you want to become financial independent, you need to keep this goal top of mind. Look at every financial decision in terms of how it will contribute to your goal. Financial decisions are not just whether to go on vacation. These decisions include whether to buy premium or store brand ice cream.

Take the time to learn all you can about growing your money.  This is not just investing. It includes your college major, your choice of careers and your choice of where to live.

If you are not self-employed, work where your employer will match your retirement contributions. Never turn down free money. Know what it takes to keep your job. If you don’t have a job, look at every possibility to get gainful employment. Mow lawns if you have to. Your luck will turn around if you never give up and you keep focused on your goal.

Marry the right person. I am not talking about marrying a rich person. I am talking about marrying someone who will give you the kind of support that helps you attain your financial goals. An unhappy marriage drains you both emotionally and financially.

Cut costs everywhere

Along with making it your priority, constantly look for ways to spend less. Can you get along without a car? Can you car pool? Can you live in less expensive housing? Can you take your lunch to work? Can you consistently choose the cheapest item on the menu?  You need to do these things if you intend to achieve the goal of financial independence.

Save and do not touch that savings

Put 20% of your income into savings. This is the part you do not touch. You will additionally need an emergency fund for things like illness, car repairs and appliance repairs. Be very serious about never ever touching this savings. While you are building up your savings, everything you can about how to invest and how to keep your taxes down to a minimum. Then, when you have reached a point where you have enough to take advantage of investment opportunities, you will be ready to invest and grow your money so that it generates enough income that you will have extra money leftover at the end of each month.

 

The Number: How Much Spousal Support to Seek?

by Leave a Comment

After a long marriage, women facing divorce struggle with knowing how much spousal support to seek. You can help yourself by understanding your future cash flow situation.

Make a detailed list of the living expenses you will have after your divorce. Identify your expenses. Create a separate list of expenses you wish to cover for your children. Look over your bank statements and credit card statements for the past year. Identify those expenses that will not change after your divorce. Then make a list of spending amounts that will change after your divorce. Will you have a new cell phone contract? How about your vehicle insurance premiums? Are you expecting to have a different home?

Estimate how much of your living expenses can be covered by non-wage income. If you have investments, the income on those may change after you start making investment decisions on your own or are working with an investment advisor. Consider whether you might have Social Security income or pension income. Estimate how much child support you think you will receive.

Will you have income from a job? How much you can earn in a career? If you already have a career, this step is relatively easy. If you are just now entering or re-entering the workforce, this step is more challenging. Consider seeking advice about your employment possibilities from a career advisor.

To find out how much spousal support you might want to ask for, add your estimated sources of income together and subtract your anticipated expenses. If the result is a negative number, that is your starting number for how much spousal support to seek. Weigh this against the Texas spousal support guidelines and the amount your soon-to-be-ex husband can manage. Work with your divorce attorney to fine-tune your approach.

I can refer you to Brazos County divorce attorneys as well as career advisors and investment advisors. Contact me today for a referral.

Six Steps to Post-Divorce Health Insurance Coverage

by Leave a Comment

Many of my clients in Houston and College Station are facing a health insurance answer during their divorce. They are unemployed and rely on their soon-to-be-ex spouse for health insurance coverage. What to do if you are in that situation?

  1. Find out if COBRA coverage is available under your spouse’s employer.
  2. In Texas, there are two kinds of COBRA, federal and state. The former offers 36 months of coverage after divorce while the latter offers 18 months. Find out which one is applicable to your situation.
  3. Get a quote on your cost of COBRA coverage from the employer.
  4. Seek quotes on individual policies from an independent health insurance advisor. (If you need a referral in Houston, send me an email at stewart@texasdivorcecpa.com.)
  5. Compare the coverage and costs of the COBRA and the individual policies.
  6. Be very careful with your timing when changing health insurance coverage from your current coverage to either COBRA or individual policy. Do not have even a day of lapse.

Most people want to put off this project. It seems intimidating. Break it down into these six steps. I cannot emphasize enough how important this issue is for your future financial security.

Get Reasonable About Spending After Divorce

by Leave a Comment

I recently had a few divorce cases where the couples spend more than they can afford. The crazy thing is that they refused to see how dangerous this is.

I read in the news that Americans are saving more and spending less. Not divorcing Americans. Don’t these people want to retire some day?

Hello, readers!  If you are facing divorce and are not a billionaire, then you are going to need to cut back on your spending. I’m sure you feel you deserve to keep your current lifestyle. Odds are that your current lifestyle wasn’t sustainable anyway.

I’m talking about people with incomes ranging from modest to a million dollars a year.

Are you socking away 10% of your income? If not then review your spending. Look for ways you can cut back. Examine your spending habits and then cut back.

Stop getting manicures and pedicures. Do them yourself. The more you do them, the better you get at it. Invite girlfriends over and make it a party.

Are you overpaying for insurance? My husband and I had our insurance reviewed last month and saved $500 a year.

Look at your summer clothes. Did you wear them all? Take the ones you didn’t wear to a consignment shop.

 

Collaborative Divorce: Most Common Mistake Men Make

by Leave a Comment

It’s the “I don’t need to do that” guy thing. If you have been making more money than your wife, you are particularly prone to this mistake.

In collaborative divorces in College Station and Houston, we look at post divorce cash needs to help us see options for splitting investments, property, etc. Wives are fine with listing their expenses. They want to show their husbands that their needs are authentic and accurate. These husbands are glad to see that I am going to show their wives – in black and white – that they can’t keep up the spending level.

You guys don’t feel you need to do a budget. You know how much you make. Your personal spending needs are modest. She’s the one who has been spending all the money. She needs the budgeting, not you.

Bingo. There’s the mistake. You need to let her see your living expenses. They may be modest, but they are not as modest as you think. In my experience, people consistently and reliably underestimate their expenses by at least 50%, many times 100%.

I worked with a couple a few years ago. The husband wanted me to work with his wife on her expenses. He told his attorney we didn’t need to look at his expenses. He said he made enough money that he was going to be just fine. He said he had modest expenses. We got well into the collaborative divorce process when he started to put his own numbers on a spreadsheet. He stayed awake that night thinking that he was offering a settlement he couldn’t afford.

The next morning, I showed him that he wasn’t worried enough. He was underestimating his living expenses. The divorce went on pause while I nailed down his true expenses. He backed off his settlement offer. You can imagine how well that went over with his wife and her attorney.  After all, he had been saying for months that his expenses were modest. His mistake and the aftermath of it slowed down that divorce by about three months.

Guys, you need to show your living expenses early in the collaborative divorce process. You need to show, in black and white, that you are not an endlessly deep pocket. Listing accurate living expense is time consuming and boring. If you don’t want to do it yourself, let your financial neutral do it. Be accurate. Be honest. Don’t guess.

 

Divorce Distractions Cost Real Money

by Leave a Comment

Divorce is a distracting process. You have your own life to keep up. If you have children, you are spending extra time helping them deal with your divorce. If you are in a litigated divorce, you are not in control of your time. If you are in a collaborative divorce, you still have to get to meetings and gather information. If you have friends, you are spending additional time grousing with them about your divorce, your attorney, your kids and your soon-to-be-ex. With these distractions, any normal person can miss a payment.

Recently, Wall Street Journal Getting Going columnist, Karen Blumenthal, wrote an informative column, How to Wreck Your Credit Score. Karen notes, “The severe consequences underscore that you shouldn’t shrug off even an accidentally missed [mortgage] payment… Being 30 days late on a house payment – even if it is an accident – can knock 100 points off a pristine 780 credit score, moving you from qualifying for the very best interest rates to the edge of subprime territory.”

So, how bad can that be? She explains that if you have a 620 score, you would pay almost 12% on a four-year $25,000 care loan. If you have a 780 score, you would pay 5% on that same loan. The difference is almost $4,000 over the four-year loan. I’m sure you can think of something better to do with $4,000.

Where would you rather spend $4,000?