Preparing high-net-worth women for the financial realities of divorce

There are economic realities that specifically impact high-net-worth women before, during and after divorce. And they better be prepared to meet those challenges every step of the way during the separation process.

If not, it could prove even more costly for them. Not just financially, but emotionally as well.

Michelle Smith, a Certified Divorce Financial Analyst and Managing Partner at Savant Wealth Management, is also the founder of Wife2CFO, a platform that teaches women to become confident financial decision-makers. In her view, women need to know what their life costs before anyone negotiates a divorce on their behalf. She says one of the most important financial issues before divorce begins is an accurate picture of what a woman’s life requires: not just her household budget, but the full cost of her life, broken into every category, including the non-monthly expenses that only arrive a few times a year.

“Many women haven't been able to see this number clearly. And if they are given a net worth statement or financial affidavit from their attorney's office to fill out, they may be creating a baseline that isn't accurate. The number she lands on may look significant and still be entirely insufficient,” Smith said.

That’s the “before” divorce advice. When it comes to the “during,” Smith says women too often expect their divorce lawyers to also be their personal financial advisors. To prevent such thought, she reminds women that their lawyer’s expertise is legal, not financial. The emotional weight of divorce is enormous, and the legal and logistical demands of the process can feel relentless. Financial clarity feels like the last thing the woman has bandwidth for, but she should create the bandwidth and surround herself with personal financial education and advice, according to Smith. 

“The decisions being made at the table could have a 30 or 40-year time horizon. No amount of exhaustion changes the underlying financial tradeoffs. And no attorney, however skilled, is responsible for the life she will live when her case is closed,” Smith said.

After the divorce, a woman needs to complete a financial baseline, Smith says. In other words, calculating what her life costs and requires, what her risks are, which behavioral patterns are likely to work against her in this phase, and what the financial terminology she'll encounter actually means.

“She needs to understand the difference between building wealth and living on wealth, because those two phases operate by different rules. She needs a stability fund designed for her actual life, not a three- or six-month emergency fund written for someone else in a different financial chapter entirely,” Smith said.

AVOID THESE COSTLY MISTAKES 

Assuming that if a woman just knew more, she would decide 'better' is also not true, according to Smith. The costliest divorce decisions often aren't made from ignorance. They're often made from fear, grief, and exhaustion in her experience.

“One of the most protective things she can do is build enough financial understanding to have a framework she can return to on the bad days, when her feelings are most volatile. So she isn't required to make her best decisions on her worst days,” Smith said. 

With so much at stake, how can women make sure they make the right financial decisions in the heat of the moment?

By working with an advisor who can help her build an infrastructure of confidence one blind spot, one smart question, and one “A-Ha” moment at a time, says Smith.

“Financial confidence needs to be built incrementally in these moments; it doesn't magically arrive. Something opaque can become clear. One blind spot gets named. One smart question gets asked in a room where she used to just nod along. One “A-Ha” makes something click that never clicked before. These moments can do two things: help add knowledge and help reduce fear and shame. Her relationship to the seeming complexity of money changes, and she starts to feel like she isn't an outsider anymore,” Smith said.