Subscribe
Share
Share
Embed
Financial Abuse, Credit Card Debt, and Rebuilding Finances Post-Divorce
In this informative episode, Seth and Pete dive into the heavy topic of financial abuse with expert guest, Certified Divorce Financial Analyst and Accredited Financial Counselor Leah Hadley. They discuss the various forms of financial abuse, the mindsets and behaviors that enable it, and most importantly, how to recover and rebuild your financial life after divorce when financial abuse was present.
Leah shares her wisdom and experience in helping clients heal from financial abuse and become empowered, intentional money managers. Key themes include reframing your relationship with money, budgeting with intention, reducing credit card debt strategically, and planning for your financial future.
A Few Questions we answer in this episode:
- What does financial abuse look like in a marriage?
- How do you rebuild financial confidence after divorce?
- What are strategies for getting credit card balances down?
Key Takeaways:
- Financial abuse stems from an imbalance of power related to money access and control.
- Reframe budgeting as intentional spending aligned with your values, not limitation.
- Consolidate high-interest debt and close credit card accounts to change behaviors.
- Be deliberate with beneficiaries, inheritance, and asset distribution in divorce.
Seth, Pete, and Leah Hadley deliver an insightful look at financial abuse and provide helpful strategies for listeners rebuilding their financial lives after divorce. Tune in to gain knowledge that can lead to financial confidence and empowerment.
More About Leah
Leah Hadley, host of Intentional Divorce Insights, is an experienced mediator, Certified Divorce Financial Analyst and Accredited Financial Counselor. She is committed to providing compassionate financial guidance through life transitions. Leah will tell you she’s had many challenging financial times in her adult life–adopting a sibling group of three, getting divorced, and building a business from the ground up to name a few. These have been times when her ability to hunt down appropriate resources and careful financial planning was critical to her peace of mind.
A former investment analyst and sought-after speaker, Leah is the founder of Intentional Divorce Solutions and Great Lakes Investment Management. Leah uses her knowledge and more than 15 years of experience to help her clients make intentional financial decisions.
Links & Notes
- Find Leah on her website or on LinkedIn
- Check out Leah’s Podcast Intentional Divorce Insights on YouTube and Instagram
- Schedule a consult with Seth
- Got a question you want to ask on the show? Click here!
- (00:00) - Welcome to How to Split a Toaster
- (01:19) - Meet Leah Hadley
- (02:21) - Financial Abuse
- (04:12) - Power Imbalance
- (09:17) - Figuring Out Your Relationship With Money
- (13:46) - Money Identity Foundations
- (14:54) - Rebuilding Financial Confidence
- (17:02) - Juggling Lifestyle Elements
- (19:59) - Learned Skill
- (20:25) - Not Restriction but Intention
- (23:44) - Deal With Fear Head-On
- (25:49) - Credit Cards and Debt
- (32:35) - Making It Harder
- (33:45) - Behavior and Reframing
- (38:54) - Building Awareness
- (39:20) - Taxes Etc.
- (40:42) - Beneficiaries and Contingent Beneficiaries
- (46:48) - Tools to Help
- (49:26) - Finding Leah
- (50:58) - Leave Us a Review and Rating
- (52:22) - Wrap Up
Establishing trust with Co-Parents can be difficult when alcohol abuse is involved. Use Soberlink as an opportunity to improve co-parenting arrangements. Visit their site to learn more and get a promo code for $50 off.
Creators & Guests
Host
Host
What is How to Split a Toaster: A Divorce Podcast About Saving Your Relationships?
Seth Nelson is a Tampa based family lawyer known for devising creative solutions to difficult problems. In How to Split a Toaster, Nelson and co-host Pete Wright take on the challenge of divorce with a central objective — saving your most important relationships with your family, your former spouse, and yourself.
Pete Wright:
Welcome to How To Split A Toaster, a divorce podcast about saving your relationships from True Story FM. Today, does your toaster have fiduciary intention?
Seth Nelson:
Welcome to the show, everybody. I'm Seth Nelson. As always, I'm here with my good friend Pete Wright. Today, if you've been the subject of financial abuse leading towards your divorce, you'll want to listen to today's show. The Institute for the Divorce Financial Analyst reports that money issues account for 22% of divorces. Depending on your source, that number is high as 40%. In that number lies the subset of behaviors where one spouse uses money maliciously against the other.
How do you rebuild your financial life after a divorce rooted in financial abuse? Even more important, how do you refocus your values around self-worth and money in a financial abuse recovery? Leah Hadley is the host of Intentional Divorce Insights. She's a certified divorce financial analyst and accredited financial counselor. She joins us today to help us untangle financial abuse, post-divorce. Leah, welcome to The Toaster.
Leah Hadley:
Thanks so much for having me. It's my pleasure to be here.
Pete Wright:
Leah, it's great that you are here because I think we've talked about this topic. It's a heavy topic. We're talking about financial abuse today, but we've talked about this topic before. But what I love about your perspective is that there's this idea that we have to embrace what is, the fact that we've been in a relationship with financial abuse, and then we have to talk about rebuilding and rebuilding in alignment with a rediscovery of values, a values-based approach post-divorce. And I think that that digs so much into this question of identity, figuring out who you are when your divorce is in the rearview.
So I wonder if you could kick us off with just telling us a little bit about your perspective on financial abuse. What is it? What have you seen? And then we can start talking about rebuilding your life after.
Leah Hadley:
Yeah, it's interesting. Financial abuse really comes in all shapes and sizes, and all different kinds of people experience it. It's not limited to any particular demographic. I think a lot of people often think of financial abuse in terms of somebody... Hiding assets as a common one that people think about. A lot of times people think about it in terms of elder abuse or financial scams. But when we see it in a relationship, it's about this imbalance of power as it relates to money. And that could be access to your accounts, it could be access to your financial information. It could be limited income opportunities like limiting your spouse from actually being able to earn or grow in their career. So it really comes up in a variety of different forms, and depending on how somebody has experienced it and how long somebody has experienced it, there can be a lot of baggage coming out of a relationship where there was financial abuse.
Pete Wright:
Seth, where do you stand? What are you seeing?
Seth Nelson:
Well, I call it financial infidelity, but I think abuse, infidelity, it's all just kind of different ways to describe the same behaviors. What I see a lot is sometimes it doesn't happen natural. It happens organically and not on purpose. So what I mean by that is someone just divides up what they do. We've talked about it, Pete. We'll just say the guy's out there and working, and then the wife leaves her job and her career, and I tell people who are getting married now and say, "Seth, you're a divorce lawyer. How can we avoid it?" I say, "You just have to have conversations." If you're going to leave your career at 35 and you get divorced 15 years later and now you're 50 and you've been out of the workforce, that could be a problem. And if the person is trying to keep you from working or not giving you access or you're not putting money away into an IRA, even though you're not working, there's all these different things that you can do to soften the blow upon divorce when we have to divide assets.
But the problem is some people just fall into a habit. They're like, "I don't know my money. I swipe the credit card. I think it gets paid. It hasn't gotten declined." And I've had some people wake up and they're like, "Oh my God, I knew we were going to be in bad shape, but I didn't realize we were going to be devastated with all this debt." Now, I've had other people that, and this is my question for you, Leah, is this financial abuse? Let's just say husband controlled all the assets. They didn't spend a lot, and they go through a divorce and she wakes up and she's a multimillionaire. She's a little bit annoyed. "Why haven't you let me buy the basics that I wanted to for the kids?" So everyone always thinks that it's bad. Sometimes you wake up and you have what people would consider substantial wealth, but it's still impacted you on how you've been dealt with the last 10, 15, 20 years.
Leah Hadley:
Absolutely. And it is about that power imbalance. And where somebody is exerting that power, taking on that control, and not giving the other person access, that is absolutely financial abuse. It doesn't mean that they're destitute, it doesn't mean that they don't have the resources, but they don't have access to them. And so that absolutely is a form of financial abuse. And unfortunately, one of the things that I see with women in particular who have experienced a marriage like that is now they have money, they have access to money, and they spend through it very quickly because there's this pent-up demand for this lifestyle that they wanted to live during the marriage. And sometimes people really do blow through assets so quickly that they leave themselves in a very precarious financial situation. And it doesn't have to be like that, but it's just that processing of what they experienced and now having access to significant amount of money and not having a plan for how to have to handle it.
Pete Wright:
That's a new bent on this discussion for me. The fact that the gaslighting behavior or the entrapment behavior, "I'm going to control your behavior, spouse, by controlling or hiding assets from you," that in the divorce process you may end up having a bit of a windfall. It's like bonus season writ large. Let's just go spend it, buy the car, byy the house, whatever.
Seth Nelson:
That's exactly right. It doesn't feel like a windfall to them because even though... Look, Pete, if your wife came to you, I hope this never happens, and says, "I want a divorce," and then you're going through the process and you're like, "Yeah, I know our money." And then you realize she's got 50 million in the bank that you didn't know about.
Pete Wright:
Oh, God. Dare to dream. What are you doing to me right now?
Seth Nelson:
But you would be thinking, "Oh, I'm good. I got 25 million." But think how you would be that you didn't know you had it all those years, and that's what people latch onto. That is where I think it really messes with people's minds, and then they felt like they could never go buy... It might be something simple like a new pair of jeans, or they always did shopping at the bargain store or the baby bungalow stores that recycle strollers and cribs, and they just want to go buy something new and they were never allowed to. And that can really impact someone psychologically on how they use money post-divorce, because now they have it. And like Leah's saying, man, Pete, I know you don't think so, but you could burn through 50 million, 25 million pretty quick.
Pete Wright:
Oh, Seth, I do think so. Are you kidding me? I already got ideas like you're talking. I'm just making a shopping list, man.
Seth Nelson:
You've already spent 75 million, haven't you?
Pete Wright:
Easy. I got to rein it in. But see, I think that gets to the question that I'm so interested in today. When we're talking about rebuilding your financial life after divorce, in case where you may owe a lot or have a lot, depends so much on how you walk through the process of figuring out who you are and what your relationship is with money. And that's why Leah's here. How do you coach people in this situation to rewire themselves after learning these kinds of things were going on in their marriage that they never knew about?
Leah Hadley:
Well, It starts with really getting aware of where you stand and what your relationship is with money. I'll tell you in my first marriage, money was a very tense issue. My husband at the time, he was raised in a developing country, so surrounded by poverty. I worked hard. I was an equity research analyst at the time. I wanted to be able to spend my money, and he was very much a saver. He was very much a saver. And what I found going into my next marriage is I had that baggage associated with, I had hidden my purchases over the years while I was married and done those kinds of things just to keep the peace in our house at the time. And so having that experience is really helpful because I know how I acted and the things that I did, and that allows me to really identify with a lot of the folks that I work with and acknowledging the fact that if we don't recognize the behavior, we're going to bring it into the next relationship. It's going to continue to create problems.
And so it really starts with that awareness of how do you think about money? And we even look beyond just that marriage of how did you all talk about money when you're growing up? Everybody is raised with a different relationship with money. Are you comfortable spending? Are you comfortable saying, "I'm in control of my income?" Are you comfortable knowing that you can invest to grow wealth? These kinds of things. A lot of folks just are not raised in an environment where they have these empowering money messages and then carried that with them into their marriage and maybe had some financial issues in the marriage. And so it really does start with just getting very clear on what is my relationship with money? How do I feel about it and where does it come from? And what is the messaging that I'm telling myself that's just a complete miss? So a lot of times when we're having conversations, and I remember a very clear one with a client where she was saying, "Well, I can never make as much money as he did." And so I stopped the conversation. I said, "Well, why not?"
Pete Wright:
Yeah, that's a straight-up limiting belief, right? You've just programmed yourself. Player, you play yourself.
Leah Hadley:
What if we explore a world in which you can? What does that look like to you? And so really paying attention to the language that people are using as it relates to talking about money and acknowledging where they're bringing that baggage into the conversation. But honestly, Pete, sometimes they don't even want to pick up the phone and have the conversation to begin with because they are so uncomfortable talking about money. And so I acknowledge the fact that if you even take the step to pick up the phone and make that initial call, let's celebrate every little step you make along the way, because that's huge for a lot of people.
Seth Nelson:
And a couple of things you've said there is that when you say, "Well, I'll never make as much as he does," when I hear that, not only do I see it as limiting, but there's an entitlement aspect that I think a lot of people getting divorce have. And they, no matter what the law is, say, "Hey, this is what Florida will provide under the law for you in this factual scenario." It's never enough. And when they say things such as, "Well, I'll never make as much," or, "It's really unfair,"
I'm like, "That's all true. Let's just assume that it's unfair. I don't deal in fairness, but you need to let that stuff go. And if you don't think you're going to make as much, maybe it's true, maybe it's not, but it doesn't matter. It's not a comparative anymore. Go do what you can do, because being financially self-sufficient is the most powerful thing you can do for yourself. And it will bring confidence, it will bring security, but you got to let some of the divorce aspects go and just rebuild and rebuild and rebuild and be smart with your money, and talk to people that understand how money works."
Pete Wright:
The thing that just unlocked for me is that the behavior and our belief system about money, the internalized behavior that we have around our money, is not determined by... Stop me when I start lying. Is not determined by our relationship with our potentially financially abusive spouse. One does not naturally find themselves in a position where they're being abused with money if they grew up with a really strong identity about money beliefs. Is that fair?
Leah Hadley:
I think that's very fair. I think a lot of what people bring into that relationship does have to do with how they were raised to deal with money. And a lot of times there is no conversation about money when you're growing up. It's just something that's not talked about, so why would you assume that it's going to be something that's an open conversation in your marriage, right?
Pete Wright:
Right. And so time passes, time does what it does. And whether you are a willing participant or an unwilling participant in the behavior of financial abuse, there you are. So here you are outside of the divorce. Is there an exercise or something that you lead them through to help rebuild financial confidence? What does that look like?
Leah Hadley:
So I really help people to get very clear around what their concerns are, what their challenges are as it relates to money, so the more specific that we can get. The financial planning process can be incredibly empowering for people, especially if they've never gone through anything like it before, because it gives them a roadmap to exactly what I want to accomplish and how I'm going to get there. And so it really puts you in that driver's seat. But we need great clarity around what are your goals? What do you want to accomplish? What are your worries? What are you really concerned about? There are lots of people who lay awake at night worried about various financial issues, whether it's, am I going to be able to pay the bills this month? Am I going to lose the house? Or even just I don't know how much to spend. I don't know if I'm spending too much or not.
So there are so many things that people worry about as it relates to money and never knowing whether or not they have enough. So when we get really clear around the things that are really making them feel insecure and we can show them in great clarity, you're going to be okay, or it's not always the case, right? You're right. Your expenses are higher than what your income is and that's not sustainable. Here are the steps you can take to make a change. And that, again, is really empowering because it shows them that they don't have to live, they don't have to continue in that situation, where the next thing they know they're drowning in more debt or whatever the next step is there.
Seth Nelson:
And to be clear on this, on budgeting, because some people... Pete, you know me, I love journaling. Leah, hate it. Don't do it. Pete knows it.
Pete Wright:
He does it all the time. He's just talking a big game. He actually has My Little Pony budget diary.
Seth Nelson:
I do. It's really cute. Do you have any idea how expensive a unicorns are these days? Supply and demand, baby. There's not a lot of them out there.
Leah Hadley:
That's right.
Seth Nelson:
But here's the thing that people that I've talked to a lot of people about finances and money is where they can maintain a lifestyle, but you don't get everything in your lifestyle. So if you want to hold onto the house and be "house poor" because all your money's going for taxes, insurance, and mortgage, and you don't have money to travel, or you downsize your house, but now you have money to travel. Or you downsize and maybe you don't buy new clothes all the time, but there are these, a lot of women use these, where you can rent clothes and literally they ship them to you. You wear them, they're in your size. If you like them, you can ultimately purchase them, or you have them for a month and you ship them back. But if you like to have new clothes all the time, there's a subscription that you can do that's actually less expensive than buying all the stuff that sits in your closet.
So there's ways that you can maintain a lifestyle on spending less money. So I talk to them about that and especially if I'm dealing with a person who is getting divorced that does not have a lot of time to work before the age on which they would like to retire, or even if they're a little younger, I talk about, "Do you want to ever be unemployed?" And everyone says, "No, no, I don't want to be unemployed." I said, "Yes, you do. It's called retirement. You want to be unemployed."
Leah Hadley:
Can't happen soon enough.
Seth Nelson:
You got to save for it now. And I always tell people, "You'll need money now. You'll need money in the future. What are you willing to give up now so you have the money in the future, and how do you pay yourself first?" Now, I know what Leah's going to tell me. This is bad financial advice. You should go to Vegas and put it all on black, right?
Pete Wright:
That's right. Big lottery person, Leah. Lottery Leah is what they call her in the neighborhood.
Leah Hadley:
Hardly. Most of the people I work with are very conservative as it relates to investing, no question about it, and it's because they've come out of difficult situations and they're not comfortable taking the risk. But what you're talking about is one of those things that is really empowering to people, to know that they have choice. A lot of times people are just managing their money on autopilot, staying in the house that they've always lived in, staying in the neighborhood they've always lived in. But there are so many wonderful examples that I could point to where people made a decision and they said, "You know what? I don't want to have that house. I do want to travel. I do want to enjoy the wealth that we've accumulated in this real estate, and I want to look at living life differently now that I'm on my own and experiencing things I always wanted to experience before," and all kinds of things.
And so helping people to get excited about what this next chapter could look like, knowing that they can be intentional and they don't have to just do what always was, it really is something that is beautiful to witness when I'm working with people.
Seth Nelson:
And the other thing about this, Pete, and I know you know this, this is a skill that is learned, and so many people are just terrified of the topic. And I'm like, "You can learn this. This isn't really that hard. It's some basic math." And if you're not good at math, there's an Excel spreadsheet. There's all sorts of budgetary stuff out there that's going to do the math for you.
Leah Hadley:
Well, I think where budgeting gets a bad rap is people assume that it's restrictive. And what I like to tell them is it's not about restriction, it's about intention and being really deliberate in how you spend your money. And so when you stop thinking about, "Oh, you're going to tell me I can't spend..." And people tell me that all the time, "I don't want to do budgeting because you're going to tell me I can't spend money on X, Y, and Z." I don't care what you spend your money on. I care that you make a decision about it, and that you really decided this is what I value, this is what's important to me, and I'm going to make the decisions that are in alignment with those values.
Pete Wright:
Yeah. I think that's the whole thing. I've got a friend who has just gotten himself out of some extraordinary debt, and the way he puts it is before he figured out money, he thought of money as jazz, that it's improvisation, it flows in, you spend it, sometimes you'll get some new money, sometimes it's old money, it's all jazz. He just wants to improvise. And he said, "The problem is, money's classical music. It's structured and planned and it's long, so you've got to plan for structure over a long period of time." And he said, "Until I figured that out, money was just something I didn't understand." And I think I like the way he talks about it because he doesn't talk about it like we hear so many people talking about it, which is it's a burden, it's a struggle. It's something that's hard to manage. They don't learn about it because they fear it in some way. And I wonder how you think about overcoming the fear. Seth calls it basic math, but Seth is a noted mind for numbers. Of course he's going to call it basic math. What if I'm terrified?
Seth Nelson:
Yeah, Leah, Pete knows this. My love language is spreadsheets.
Pete Wright:
It totally is. You should see his actual sheets. They calculate at the end.
Leah Hadley:
So I have a client who is an artist who is very, very visual and doesn't want to talk about the numbers at all. And what she said to me one time was, she was like, "It feels like you put cozy little sweaters on them and make them nice and comfy so we can actually have a conversation about them." But that's because I talk about them in terms of what you care about, what matters to you, and bringing meaning to those numbers. And for a lot of people, there's no meaning behind the numbers. A lot of people say, "I want to save a million dollars or get to my first million dollars," or what have you. What does that mean to you? If that doesn't really mean anything, then what is that million dollars actually doing for you?
Seth Nelson:
And what I'm thinking is you have a million dollars in the bank at 5% interest, that's $50,000 a year and you never touch the principal.
Pete Wright:
And then his cheeks get flushed and he starts to sweat a little bit.
Seth Nelson:
Exactly. Now, I've talked to my son about this and when he was in middle school, the teacher went around and asked all the kids, "If you won the lottery, it's a million dollars, what would you do with it?" And all the kids are like, "I'd buy this, I'd do that." And my son said the example that I just said, which was like, "I'm going to get 50 grand a year and never touch the principal." And then he came home, he was so proud and I was like, "Great job, but did you take into account the taxes you pay on the 50 grand?"
Pete Wright:
Oh, dad. This is why I don't tell you stuff.
Seth Nelson:
Exactly, exactly. He hasn't talked to me since, actually.
Pete Wright:
Right.
Leah Hadley:
A lot of dealing with the fear is really dealing with a head-on. So if you are worried that you are going to run out of money, let's make a plan around that. Let's make sure that your fixed expenses are as low as they need to be in order for you to be comfortably living within your income. Let's make sure that you have appropriate insurance in place so you're managing potential future risk. Let's make sure you have savings built up so you can deal with the next car issue that comes up. We can create plans around making sure that we are really truly addressing the fears that people have, and that way, that can give them a tremendous amount of comfort as it relates to dealing with their money.
Seth Nelson:
And look at leakage, I call it. And leakage is those little subscriptions on your phone that are five bucks. They add up every month.
Leah Hadley:
Oh boy, do they.
Seth Nelson:
They add up quick. Leah, I recently got married and literally I asked my wife just the other day, because we just moved in. I moved into her place and I'm going to log on and I'm like, "Why do we have two Netflix? Why do we have two Netflix subscriptions?"
Leah Hadley:
Right.
Seth Nelson:
And personally, I want to get down to one Netflix and when it has different users on it, I'm taking all the kids off just to annoy them.
Pete Wright:
Absolutely. They're growing up.
Seth Nelson:
But there's little things like that that everybody has. And when I say you got to manage your money, you got to see where it's leaking out on things that you don't need or don't want.
Leah Hadley:
Yeah. And that's where the intentionality really comes in, right?
Seth Nelson:
Oh, I love the intentionality. That's right.
Leah Hadley:
Being mindful about where your money is going, where it's coming from, when it's coming in, when it's going out, so that way you're not just on autopilot. And I just went through with a couple who's not getting divorced, they're happily married, but they're struggling with some financial issues. And I think we cut out $300 of monthly subscriptions that weren't really being used. Between the music and the streaming and the newspaper, it all adds up.
Seth Nelson:
Can we talk about debt for a minute and putting stuff on credit cards? So this is how I view carrying debt. Is what I'm buying at the price that I'm buying it worth it if I'm going to pay an extra 20%? Because if you put it on the credit card at $100 and you got one of these high interest credit cards that was free for six months, but now it's 20% or 30%, that's another... Let's say you buy something for a hundred bucks. I call it easy math, but 20%, 20 bucks. You're paying 120 for it, but you don't pay it all off the next month or that year. And so you add up that one purchase of $100 and you paid it over five years or six years to pay down that credit card, that purchase of $100, you just spent $500 for that item. And my view is, no, it's not worth the 500 bucks.
Leah Hadley:
Yeah, that's a fair way to think about it for sure. I like to talk to people about strategic use of debt. So a lot of times there's a lot of messaging out there that debt is bad. Debt is not necessarily bad. High interest rate debt that is holding you back because of the amount of interest expense that you're paying on it is going to set you back in terms of reaching your financial goals. There's no question about it, but there is strategic use of debt. And so I see a lot of business owners, for example, who have this messaging all the time about not taking on debt who are missing out on huge opportunities in their business where they could be investing and doing some different things. But there are definitely are cases where I see people who are carrying credit card balances and then they're using the credit card, just because easy, to get gas or to get groceries. And they say they pay that off every month.
Well, credit card interest compounds daily, and so if you're using a credit card where you're carrying a balance, you're going to be paying more for whatever it is you're paying for, the gas, the groceries, and everybody's already complaining about inflation, and the interest rates on credit cards are up. Interest rates are up. That includes the interest rate on credit cards, and so people are seeing that their minimum payments just aren't making the difference that it was making before. And so a lot of folks really do struggle with credit card debt, and I always encourage people to really know themselves and their own behavior. But a lot of times the reason people get stuck with credit card debt is because they're actually trying to very aggressively pay it down and they're not leaving themselves any money to actually spend on stuff that comes up or stuff that they need. So what are they going to do? They're going to put it on the credit card.
Pete Wright:
They have to put it back on a credit card.
Leah Hadley:
And they're in this cycle. And so a lot of times when I'm working with people who are struggling with credit card debt, I really encourage them to first focus on savings.
Seth Nelson:
Pay the minimum. Focus on savings. Let's change our mind shift. We're going to change how we approach it. Love it.
Leah Hadley:
Right, right.
Seth Nelson:
Love it.
Leah Hadley:
And also being really strategic about getting that interest expense down. What can we do to limit the cost of the debt that you're carrying, so that way, you can get out of debt faster?
Pete Wright:
What are options in there? In your experience, what works to help get that interest down? Are you talking about calling the company and begging? Are you talking about, "Hey, I'm going to take my debt elsewhere and find another credit card for another six months?" What kind of a thing?
Leah Hadley:
I'm not a big fan of the folks that play the promotional interest rate game on the credit card, and it's just behavioral. We are always looking at habits that people are forming. And what I often see people doing is they then rack up credit card debt on-
Pete Wright:
Multiple cards.
Leah Hadley:
Yeah. But looking at things like potentially a personal loan where you can consolidate the debt, get the interest rate down. Even if the interest rate was the same, it's not compounding in the same way, so it's still saving you money
Seth Nelson:
And close the card.
Pete Wright:
Yeah, close the cards.
Leah Hadley:
Maybe not close it because that could have a bad impact on your credit, so you do want to be strategic about that. But you can freeze it. You don't have to have easy access to using it.
Seth Nelson:
And Pete, that doesn't mean you put the card in the freezer.
Pete Wright:
Sometimes it does though. That's a thing. You can put it in a bag of ice.
Leah Hadley:
If it works for you. It's harder to use that way, right?
Seth Nelson:
Pete says, "I'm going to have a margarita on the rocks." Use the one with the American Express.
Pete Wright:
I think that's really interesting, you talk about freezing it. I think the behavior is fascinating. Just taking it out of your wallet or your purse and putting it in a drawer at home so you don't have it when you're more likely to spend with it is a big deal. Just get it out of your fingers and don't make it easy. Same thing with your phone, with all the tap to pay. If you're a big tap to pay person, delete the card from your phone so that you don't easily, effortlessly use it to rack up more debt.
Leah Hadley:
Yeah, we see people really struggling with Amazon. Take the app off your phone completely. Get rid of the cards that are saved in there.
Seth Nelson:
And Leah, I know you've got a lot of good things that we're going to put in the show notes. We're also going to put Pete's credit card information in the show notes with PIN, everything, CV code. We're good to go.
Pete Wright:
We're friends and you suck, and I'm trying to rationalize those two ideas at the same time.
Seth Nelson:
We'll talk it over a drink that you're buying. Don't worry about it.
Pete Wright:
Over my American Express margarita. It's good. Don't swallow. All right.
Seth Nelson:
So Leah, I do have this question about behavior and reframing how we spend things and how we talk about it, because everybody's different. When you said I was dealing with an artist, I literally thought to myself, are you just color coding things for them? So how do you work with clients? Or people listening, how do they reframe it and get out of the cycles? What steps do you do to help them change their behaviors?
Leah Hadley:
Yeah, we do get really clear on specific behaviors that you can implement consistently, and really paying attention to what has not been working in the past. Where do we need to make adjustments? And so for some people, they do have limited savings and that has created stress in their financial life for a long time. It may not even be debt, but having no savings, it's a stressful situation to be in. And so even if it is literally every paycheck, putting away $50 into a savings account and doing that very consistently, that can be a step that really works well for people. For some people, it's setting aside a special account that every time you have those things that come up a couple of times a year, maybe property taxes, maybe your vet bills, your car insurance premium, those kinds of things that aren't neatly in your monthly budget because they just come up once a year or once a quarter or what have you.
Setting aside money in an account that they know that this is what this account is for, I have the money set aside, and that's where I'm going to pull it from. So really addressing wherever they're finding the tension or the stress in their financial situation. And you're right, everybody's different. That is one of the things I love about all the apps that are out there now. Some of them are very visual. There are a lot of people who are very visual. That can be really helpful. I do keep my budget in a spreadsheet. I'm a simple spreadsheet person. Most of my clients aren't, and so I don't technically teach people to budget the way that I do, the way that my mom taught me, but it works really well for me, and so I just acknowledged that.
So I do have a master's in education. I was a teacher before I got into the financial world, and so I did a lot of study around how people learn and the different learning styles and all of that. And I apply that to the work that we do, that people need different kinds of tools depending on how they operate.
Seth Nelson:
The other thing, and I'm just going back to lessons that I've learned and that I've passed on to my son. When he was little, he wanted an alarm clock in his room. And I said, "Okay, let's go shopping." And there was a $10 clock, there was a $20 clock and there was a $30 clock. Literally those were the prices, 9.99 going up. And I said to him, "When we go there, it will be your decision, but you need to explain to me why is the $20 clock double? How is it better by double? And then the same thing for the $30 clock, because that's the difference in what you're buying. So explain to me the difference in these and do you really think..." The $30 clock could flash the time up on the wall. And he's like, "It's neat, dad, but it's not worth that much more."
Pete Wright:
Well, it's really interesting the way you talk about that because in the spirit of words matter, "It's only $10 more" sounds a lot different than, "It's double the price of the other one," right?
Leah Hadley:
Right.
Pete Wright:
That's a really interesting way to just reframe how you think about even the smallest purchases.
Seth Nelson:
Yeah, it's percentage-based for me. Absolutely. And my kid is a freshman in college. Literally today, I reviewed his credit card statements for the last few months, and I noticed this kid loves Tasty Burger. He is going out. And we literally had a Zoom meeting with him and his mom and me about where he was spending his money and I hadn't seen his credit cards. And I asked him, I said, "How are you doing on spending?" And he goes, "I eat out too much." "Okay, what is causing that? What's the reason that you're making that decision?" He goes, "Dad, the food's just not very good." And I got a Jewish mother on the Zoom call. It's killing her that he doesn't like the food. I'm a softie. And I'm like, "Okay, let's ride this out for the first semester. I'm not going to clamp down and put a stressor on you. We can afford it, but I think it's getting up there. We'll talk about it over winter break. We'll see if anything can we adjust or what are you willing to give up?" But to acknowledge that there was a reason for it.
Pete Wright:
Yeah. Well, at least it sounds like he has an awareness, and that's the biggest challenge is when you're spending blindly and you wake up one day and suddenly you're five grand in debt, and three grand of it is the Tasty Burger.
Seth Nelson:
Right. Now, that debt might be worth it, Pete, let's be honest.
Pete Wright:
Yeah, cafeteria food-
Seth Nelson:
[inaudible 00:35:42] he was talking about.
Pete Wright:
That's right.
Seth Nelson:
But that's it. It's about being intentional in having the conversations and starting them early. And then ultimately, do you get to talk to your clients about taxes and how to save on taxes or inheritance and any of that stuff once we're building wealth or if money's coming to them from a parent that's supposed to go spend for a grandchild or anything like that?
Leah Hadley:
Yeah. We do comprehensive financial planning, so we do a lot of tax planning. Certainly through the divorce process, we do a ton of tax planning, and it's interesting. A lot of people don't have any idea even how to read their taxes, quite frankly, and so especially when we're going through the divorce process with people, it's one of the first things that we're looking at as financial analysts, really looking at making sure that everything is clearly documented and we fully understand the financial picture. There's so much information in those tax returns. But a lot of people, they've always gone to whatever tax repair, signed them, never really looked at them, never took the time to understand the line items. And so we do a lot of education around those things. I'm really a big proponent of education and empowering people to be able to read their own tax returns. Unfortunately, a lot of accountants, especially during tax season, they're busy. They are not sitting down with every client and walking through line by line what that tax return says.
Seth Nelson:
And that's what you can do when it's slower, say to your accountant, "I got it, you're busy, but I really need to understand it for next year."
Leah Hadley:
Exactly. Exactly.
Seth Nelson:
So a couple of things here, Pete, that I really want our listeners to take hold of. When you get divorced, and even when you're married, go look at who is the beneficiary on your accounts. Because in Florida, check your local jurisdiction, you have a life insurance account, you have an IRA, and your ex-spouse is the beneficiary. Even though that that asset was distributed to you in the divorce, that's a contract with a life insurance company. You got to go change it. It doesn't matter what your divorce papers say, so you've really got to look at who are the beneficiaries. And Leah, correct me if I'm wrong, and this is where you say I'm right and Pete hates it. Make sure you think about contingent beneficiaries, and a contingent beneficiary is someone who's going to get the money if your first choice isn't there or decides not to take it. Then it goes to the second person or group of people like my children or descendants.
Leah Hadley:
Well, the other thing that we often talk with people who are recently divorced about, a lot of times people think, well, I'm going to take my spouse off as a beneficiary. The next obvious choice for me is my children. Well, for a lot of folks, if your children are under the age of 18 and they were to inherit those assets, depending on the nature of your overall situation, it is likely that the other parent is going to end up the guardian of that money and ultimately responsible for it. And for a lot of people who have gone through a divorce, that's not what they want to have happen.
And so really thinking through, if you want to make sure that your children truly benefit from this money, who is going to be that responsible person that you feel confident setting up as that beneficiary or if you need to do a trust or what have you, talk with your attorney and what's the best option for you. But really that's, again, a place where you want to be intentional and make that decision deliberately. Because once you're gone, you lose control and nobody knows when that's going to happen.
Seth Nelson:
And the other thing to think about, and Leah, I'll share with our listeners and with you that recently my father passed away.
Leah Hadley:
I'm sorry.
Seth Nelson:
It's okay. Thank you. But he had an IRA and it was being split between my brother and me, and my mother passed away a couple of years ago. They really wanted to pay for a year of my son's college. That was really important to them. So there was this IRA, and it had these magic words for the beneficiaries. It was called per stirpes.
Pete Wright:
Just making up words again.
Seth Nelson:
That's right. And what that means, it's a legal Latin term. That means if I would've died before my father and then my father died, his IRA, let's just say that it was $100, my brother would get 50 and I would get 50. But because I was dead already, it would go to my descendant, which was my son. It wasn't that it just went all to my brother. That's what the magic word per stirpes mean. Check your local jurisdiction. It's been around a long, long time, okay?
Pete Wright:
It's Latin, people.
Seth Nelson:
So the reason why this is important though, my son's in college. He doesn't have a job. He makes no money. So what you can do is say, "I don't want it," and that's what I did. I said, "I don't want it." It goes directly to my son now. Now, why would I do that? Why would I give a 19-year-old money like this? One, because I told him, "It's going to be your money and under the law you can do anything you want with it. As your dad, if you ever want to get another penny out of me, you're only going to withdraw what I tell you to, and you're only going to spend it on your college education." That's the risk I'm taking. Pretty confident in it, but why would I do that?
Because if he pulls money out, it's going to be taxed, but he's in a lower tax bracket than I am. So you can save substantial amount of taxes by making, like Leah's saying, an intentional decision on how you're going to handle this inheritance or this windfall. But those types of intentional decisions, and talk to a financial planner, talk to your accountant, because we're not giving financial advice here. We're telling you there's different ways to be intentional about money and getting through a divorce and making sure your beneficiary designations are correct. But there is ways that you can save yourself a substantial amount of money on a percentage basis by being intentional with your documents. Am I wrong on that, Leah?
Leah Hadley:
No. And I'll just highlight though that you've fully understood the risk associated with doing that, and that is really important also. So yes, absolutely you can be intentional in doing the tax planning, but you do have to understand that risk. And there are a lot of college-aged kids that will take that money out and blow through it very quickly.
Seth Nelson:
That's right. And if he does, then guess what? He'll try to blow through it all. He'll be dead, because kill him, and then his sister is getting in the remainder.
Leah Hadley:
The other piece of it is when they changed the tax law around the inherited IRAs and they limited it to a 10-year distribution period, a lot of people are I inheriting these IRAs at their top earning years. And so here they are having to take those distributions where they're at their highest tax bracket, and so there are definitely opportunities like you were talking about to be strategic, but just understanding both the risk and the reward with any decision you're making.
Seth Nelson:
And when I see strippers and blow on the American Express card, we got problems.
Pete Wright:
It's never listed like that, Seth. I wouldn't know.
Seth Nelson:
Yeah, right.
Pete Wright:
Well, I'll tell you, Leah, thank you so much for hanging out with us. As we wrap up, when you are ushering people through this process, we've talked about, of course, you and Seth, you're spreadsheet pals, but do you have other tools that you recommend for people who are looking to wrap their heads around getting a handle on budgeting? And what tools do you love that you recommend for people who aren't spreadsheet buddies?
Leah Hadley:
Right now, mint.com is closing up shop.
Pete Wright:
Sadly for Mint users.
Leah Hadley:
Yeah, for a lot of people. But as a result, a lot of the other apps out there are offering great offers right now to try them out. Just give them a test drive. And I tell people, "Try things. Try and see what works for you." There are people who love You Need a Budget, and there are people who hate You Need a Budget. That's one of the most popular budgeting apps. I've been test-driving Monarch Money recently. I like to try them out to be able to talk to people about them. I have found that to be super user-friendly. The other one that we see people really liking is Tiller HQ, so those are some specific budgeting apps. But we do budgeting workshops, and in those workshops we help people think about how to make those intentional decisions. So not necessarily the nuts and bolts of using an application, but really the mindset, the thought process that goes into making it a successful experience. And I would say for a lot of people, that's the best place to start.
Seth Nelson:
Yeah. And Leah, to your point please, listeners out there, do not think of budgeting as limiting, that I can't spend my money on X, Y, and Z. Budgeting is all about just understanding where your money is going, where it's coming in, where it's going out, and then you get to make decisions on whether you want to spend it on X, Y, or Z. So Pete is probably going to go through and be like, "I have a lot of streaming services for movies. Maybe I can limit that."
Pete Wright:
Why are you calling me out like that, bro?
Seth Nelson:
Listen, I'm just saying, when you have five of them, because that one has your favorite movie that might not be there in six months, you got to just make decisions. You're allowed to have that, Pete.
Pete Wright:
I feel so heard. Well, thank you very much, and I'll just raise a flag for You Need a Budget. I'm one of those people who loves it. My entire life is in it. My kids' lives are in it. They love it. And when you think of it not as limiting, it's so great. You finish filling up your little category and you're like, "Look at all the opportunity I have to spend this money on this thing that I said I wanted six months ago." It's absolutely fantastic, so definitely a plug for YNAB. It's really cool.
And Leah, it's plug time, and your plugs are complicated because as we record this, I can't see what you're plugging because you're doing a whole thing. You're rebranding your entire life that is going to launch as this episode is released. So tell people where they will need to go to learn more about you and your work.
Leah Hadley:
Yes, I am very excited that we are rebranding to Intentional Divorce Solutions, which is going to better showcase how we support people in a very holistic way through the divorce process. And you can go to intentionaldivorce.com. We have a podcast that's launching, Intentional Divorce Insights, as well as a YouTube channel, so lots of great video and podcast content that you can come and learn what it means to be really deliberate and thoughtful through the divorce process.
Pete Wright:
Outstanding. All the links will be in the show notes. We sure appreciate you hanging out with us, Leah. It's really great to continue to dive into this conversation and hope some folks are getting some tools out of this. I need to plug ourselves, Seth. Can I?
Seth Nelson:
Yeah. I just have one thing to say before or after, it's up to you.
Pete Wright:
No, you do do your thing. You do you, man.
Seth Nelson:
Okay. I just want to let everyone know that Pete's PIN is 1234.
Pete Wright:
I'm also available to be your designated beneficiary. If you have a large dollar value insurance policy or IRA, I am available. Reach out.
Seth Nelson:
And that's the thing about Pete, I will be your small dollar IRA or beneficiary. I do not care.
Pete Wright:
Look, we haven't said this in a long time, but I'm going to go ahead and say it, that if you're listening to the show and you've got something useful out of this show and you are listening on Apple Podcasts, you know what you can do? You can leave us a review there and you could be like SallyAnnSmith75 who said recently, "This is such a great podcast. Seth and Pete do such a wonderful job and are engaging. I've learned a lot when listening and have enjoyed myself. They're funny and have great conversational style. They do their homework when interviewing guests and it shows. You don't need to be getting a divorce to find wisdom in this podcast, as well as take action items to support you and having better relationships. Thanks, guys." No, thank you, Sally Ann. You're fantastic. How about Best of the Divorce Podcasts from Maryland, Amy. "I feel like Seth was my lawyer in my divorce as this podcast. Really helped me to learn a lot, but also felt like it was hanging out with friends." Addendum, probably spending Pete's money.
Seth Nelson:
And here's the beauty of all this, Pete, is that How to Split a Toaster is free in your budget.
Pete Wright:
That's right. That's right. You can line item it if you want. Zero. Anyway, thanks. We sure appreciate that. For you Apple podcast listeners, it's just really, really nice to see. So if you're listening and have a spare minute to hang out on Apple Podcasts and share that five star review in a nice comment like Sally Ann and Marilyn Damie, they're great. Thank you everybody though for downloading and listening to the show. We sure appreciate your time and your attention. Don't forget, you can ask us questions and definitely ask us questions, because our listener question episode is coming up in just two weeks. We are going to be releasing the listener questions episode. We got a whole slew of questions in there, Seth. I don't know. I hope you're ready for this. This is going to be big.
Seth Nelson:
Bring it on.
Pete Wright:
We might need to bring in a panel. Very excited to nail down those listener questions.
Seth Nelson:
Panel not in the budget. Can't afford them, Pete.
Pete Wright:
Oh, can't afford it.
Seth Nelson:
We're spending our money on something else.
Pete Wright:
Head over to howtosplitatoaster.com. There's a button that says, "Hey, ask a question," and you can click on that and ask us a question so we can get it into that episode. Very excited about that. So, thanks everybody. On behalf of Leah Hadley and Seth Nelson, [inaudible 00:49:44] favorite divorce attorney, I'm Pete Wright. We'll see you next week right here on How To Split A Toaster, a divorce podcast about saving your relationships.
Outro:
How To Split A Toaster is part of the True Story FM podcast network, produced by Andy Nelson. Music by T. Bless and the Professionals and DB Studios. Seth Nelson is an attorney with NLG Divorce and Family Law, with offices in Tampa, Florida. While we may be discussing family law topics, How To Split A Toaster is not intended to, nor is it providing legal advice. Every situation is different. If you have specific questions regarding your situation, please seek your own legal counsel with an attorney licensed to practice law in your jurisdiction. Pete Wright is not an attorney or employee of NLG Divorce and Family Law. Seth Nelson is licensed to practice law in Florida.