Empowering Families

Hi, this is Katherine Miller. I’m the founder of the Miller Law Group and Director of the Center for Understanding in Conflict. I’m on a mission to change how people divorce and help them divorce with dignity. In honor of Financial Planning Week in early October, I thought it would be helpful to get some financial planning tips from experts to help divorcing individuals think about their money intelligently.

Today, I’m here with Michelle Smith, founder of Smith FSA and creator of the Wife to CFO program, which helps women manage their money post-divorce or after the death of a spouse. Michelle, I’d love for you to share your top three tips for people who are getting divorced and what they should focus on financially.

Michelle Smith:

Thank you, Katherine. Happy Financial Planning Week! My first tip is to understand the difference between a rate of return on your investments and a rate of withdrawal. Many people confuse the two during a divorce. We often make assumptions using a static rate of return, expecting consistent earnings year over year, which is unrealistic. Instead, focus on the rate of withdrawal—how much you can safely withdraw from your assets each year to ensure your money lasts 20, 30, or 40 years, depending on your age.

Katherine Miller:

So, you’re saying that while the rate of return is unpredictable, the rate of withdrawal should be a consistent and safe percentage to ensure financial stability.

Michelle Smith:

Exactly. The rate of withdrawal considers that some years you might earn more, and some years you might earn less. By pegging your rate of withdrawal to a sustainable 3-4%, you can balance the highs and lows without drastically adjusting your lifestyle.

Katherine Miller:

That’s very insightful. What’s your second tip?

Michelle Smith:

My second tip is to do the math around what feels unfair. Many people get stuck on a principle or advice without quantifying the issue. For example, if you’re arguing over the value of a beach house and are $500,000 apart, consider what that amount means after taxes and in the context of your total marital estate. Often, the issue that feels huge is actually a small percentage of the overall assets. Quantifying the issue can help you move past it or let it go smartly.

Katherine Miller:

I always think of “fair” as the F word in divorce. Putting issues in perspective can make them easier to resolve and help you move on with your life.

Michelle Smith:

Exactly. Quantifying issues rather than taking rigid positions can save on professional fees and lead to smarter decisions.

Katherine Miller:

What’s your third tip?

Michelle Smith:

Understand the $100,000 mistake. This mistake happens when people don’t account for the impact of not receiving a cost of living adjustment (COLA) on spousal or child support over 10 years. For instance, $8,000 a month in support without COLA for 10 years totals $960,000. But with even a 2.5% average inflation rate, it totals $1,075,000—a $100,000 difference. Consider the long-term impact of these adjustments.

Katherine Miller:

That’s a significant point. Understanding the long-term financial impact is crucial, especially when it comes to support payments.

Michelle Smith:

Absolutely. My Wife to CFO program helps women build a solid financial foundation. It’s an eight-week online course designed to help them stay in the financial conversation and manage their money effectively. You can sign up for the course at www.wifetocfo.com.

Katherine Miller:

Thank you so much, Michelle, for sharing these valuable tips. If anyone has questions about the right financial process for their divorce, give us a call at 914-303-5249. Remember, nothing will change if you don’t take action. Thanks for listening.