Divorce can be emotionally and financially overwhelming. That's why I'm teaming up with Sunny Wishart, president and founder of Ala Carte Financial and a certified financial planner. We will show you how to understand all things money without feeling ashamed, overwhelmed, or embarrassed. You will learn. Learn more. Ask questions. No question is a dumb question.
Welcome to Money with Sunny.Â
In this post we’re going to discuss:
child support
spousal support
the importance of becoming or being financially independent
Child Support:
This is the money one parent pays to the other to support their children. There's no tax implications on that. So child support paid out is not tax deductible and child support received is not taxable income. Child support is for the children. When it comes to child support payments, a good setup in financial planning is to use child support towards funding an RFP or something similar. Instead of this coming out of your cash flow, use the RFP to make sure your kid's education is safe if that's a goal for you, or if your kid is in sports, put this money into funding the expensive sports. Don't bring this money into your cash flow to pay for bread, milk, and heat.
Spousal Support:
The purpose of spousal support is to help meet the ongoing financial needs of a financially dependent spouse for a defined period of time. This is for a financially dependent spouse.
When you're looking at spousal support, the person paying the spousal support has that as a tax-deductible expense because you're technically paying them income. The receiving spouse has to claim that is taxable income on their income taxes. Again, this is for a defined period of time.Â
Importance of becoming or being financially independent:
When you re-read the definition of spousal support, it's financial dependence. Being fully dependent on spousal support payments has many risks. They don't come in on the first of every month like a paycheck. They're not as reliable as you'd like to think. It looks all pretty on paper, but if the money doesn't come in for whatever reason, you are the one in trouble.
What is the best way to become financially independent when you’re transitioning through a divorce?
As you are transitioning through divorce, it is okay to temporarily count on child support and spousal support to pay your bills until you get through the hump, start getting out into the workplace and start building your business or sell your home and get on your own two feet. But becoming financially independent is important especially since support payments are for a definite period of time. If you depend on this support without having other sources of income, then when the contractual period ends, you will have to make drastic changes to your lifestyle and will have to go through even tougher times at that stage of your life.Â
Becoming financially important as early as you can is key. You can personally earn enough money to pay your bills and maybe make investments and all these other things and be okay on your own. If you receive some spousal support or child support, the optimum is that that's gravy, the icing on the cake.Â
This is something Sunny does every day. She'll take you through different scenarios, look at things from different angles in different ways and help you create a plan to become financially independent.Â
There are aides out there to help you understand the approximate amounts based on each person’s income and this is something your lawyer will help you with as well. Each divorce and each situation is unique. You're in the driver's seat when it comes to creating your separation agreement, your parenting plan and your money organization. This is unique to you. You're going to want to be flexible, and come up with an agreement that works for both you and your spouse, your family and your situation.
This does not have to be daunting, scary or depressing. It can be exciting. You can include trips in your plan. You can include manicures and pedicures, and time with the kids. What's really fun is when you are free from financial burden and you are financially independent.
Figuring out how to manage finances among so many other things during this tough time can be overwhelming. That is why I am offering a 9 days Mini Course to help you get some clarity around what is best for you and your family. Sign up today and get in touch if you have any questions.Â
And remember, you're perfect just the way that you are. You are awesome. You are wonderful, you are worthy, you are loved. And we look forward to talking to you again next week.
Wendy
xo