Practical Financial Insights to Avoid Common Mistakes – Amy Rose Herrick

Welcome to the D Shift podcast, where we provide inspiration, motivation and education to help you transition from the challenges of divorce to discover the freedom and ability to live life on your own terms. Are you ready? Let's get the shift started.

Hi, and welcome to the D Shift Podcast. Today we have the privilege of speaking with Amy Rose Herrick, and she is a chartered financial consultants. And I'm not really sure what all of that is all about. So we're gonna let me introduce yourself here in just a second. But first of all, thank you so much for coming on today.

Oh, it's good to be here. I've been looking forward to this one.

Terrific. Thank you so much. So I am going to turn it over to you tell us a little bit about your area of expertise, your passion. And I'm guessing you got some really good tips and strategies for people to think about when they're going through divorce or after divorce or even into opening up a business in the future. So give us some insight, Amy? All right.

Well, chartered financial consultant has those little initials. You know, most people are used to alphabet soup, minus ChFC. Some of you have heard of things like a CFP, certified financial professional, you know, you see CPAs you see all this alphabet soup? Well, really what mine entails is if it touches money, that's what I do. It could be debt restructuring, it could be your cashflow. It could be your income taxes, it could be the titling of your assets, divorce divisions mean all types of things that if it touches money, and it goes through your hand or your lifetime, or at death, those are the type of things that I work with. And then if I take that hat off, I'm also a tax professional. So there's an element there that deals with income taxes and planning and strategies there that work with that. I'm an author. And I have had Oh, my gosh, insurance licensing since night, January 9 9091. Because I remember the dates on that. And that helps me do the advisory portions that I do. So there's a lot of different hats that I wear. But it all comes back to how do I support a person financially and with managing their resources, whatever that might be? A little long, but does that give you an idea? No, that

that's great. And that's, I mean, that's a huge breadth of expertise and experience that you're bringing, to everybody listening in today. So thank you for that. One thing that I think that that is a little bit worrisome for most women, either in the divorce after the divorce or starting a new business is the financial side. Because I think that's kind of I don't know, if I want to call it a weak area, but not a definite strength for a lot of us. I know that was a big challenge for me starting my own company was okay, how do you deal with the financial stuff? How do I, you know, what's the tax write off? What What can I use? What? What do I need to do? How do I need to budget all that kind of stuff. So if I was to ask you to break it down into kind of the simple, simple little steps that people could use, and I don't know where you want to take it, if you want to do business owners, if you want to do divorce, if you want to talk about structuring your finances, just overall, I'm going to leave it open to you because I think any of those areas or topics of interest, so Well, I'm going to

address this to everybody who's listening, because we'll hit on some things that no matter where you are, that these will be helpful to you. So let's start out what I will say on budgeting, because that's one of the big things, you know, you can go to a million places and you can get budgets, I don't need to help you with the budgets. But where I think I can put a light bulb on. For many of you, when you're doing the budgets, you're looking a lot of the stuff that you're doing on a monthly basis. I like what is called an irregular expense account, I want you to have it completely separate. And in that we're going to put things that you pay quarterly or annually or that only happen a couple times a year. And let me give you some ideas, your medical co pays and your deductibles. What about your car repairs? Are you paying your car insurance? You know, every six months or once a year? What about your life insurance? If you pay it annually, give me a tip. You can save three to 8% if you will pay some of your insurances annually, which keeps more money in your pocket. What about are you got kids in school? Do you have to pay for books and buy you know all those things that come school time? What about summers? Are you working and you got to have summer childcare? So you can have a really big list of items that just don't happen to you every month. They come up. How about Christmas? Do anybody ever have a birthday? These things add up and let's pretend that you've come up with a number and what I like to have individually we'll do is put everything on the list you can think of. And then I want you to multiply it by 110 to 130%. For all the things you forgot, we want to have a little padding here. Good. Yeah, yeah. Now let's pretend my magic number is $1,000, you'll find I use round numbers because they make math so much easier. So if I came up with 12,000 a year, I would want to divide that and I need to put away $1,000 A month if I do it by the week, bi weekly, whatever. But I'm going to put $1,000 a month into this irregular expense account, so it's not mixed in with my regular daily money, then when I've got to fix the car, when I have to pay and go get a filling, when I've got to do those things that come up, I don't have to worry about robbing Peter and paying, Paul, because I've made that a very level budget item. So does that make sense?

What a great idea. Because you're right, it's not the things you've planned for that catch you up. It's those it's those things that you don't think about. So you call that an irregular

expense account, right? Yes. Yes, and I had, and if you can start it and jumpstart it with one or two months, in case that first thing hits you, and this account is going to go up and down like the tides, when you put money into it, and maybe this month, you'll take some stuff out, maybe you won't, the balance is never supposed to get really large. If it's large, it's probably because there's a couple of annual payments you haven't made yet. Okay, that are going to occur in the same month. But the objective there is to make it a level expense, so that it's easy to manage. And you don't get fooled, thinking that there's extra money in the checking account. And you forgot what's coming due in six weeks,

right? So I just want to Oh, I'm sorry. And I stepped right over top you I apologize for that. Um, so I want to clarify, because I know that we've had somebody else on here talking about emergency accounts. So this is different. For all those people that caught that podcast, this is a different, this is a third account, in addition to your site well for savings checking, sometimes those are almost together now, right? And then there's going to be the emergency and then there's going to be this irregular expense account.

Yeah. And let me tag on to that emergency account, because you brought it up in my perfect world, which doesn't always exist, your emergency account, if you're a W two person, you probably want to aim for three to six months of expenses as being a good guideline. So if you had an unexpected illness, unexpected job loss, you have got a little bit of padding to have time to pivot to whatever the new reality is, or secure new employment get well figure it out. Now, if you are self employed like Marty and I are, we may be looking at between six and 18 months, depending upon the scope of your business, whether you have a roller coaster, you know, income or if it's relatively steady, because it may be different and be a little different for us to be able to pivot. So yes, that emergency account is very important. You know, once you get it built, you leave it alone, you want it in a liquid account, that's not an investment account, it's a liquid account, and then you can divert some of those funds you had been putting into it, you know, divert those over into something else,

that savings if you're going to make use of money or whatever, right,

right? Because if you have to rob that account, now we've got to switch back into the mode to putting the money back in. And if you learn to live on that difference, it's gonna be real hard to do. Right? Okay, now, I will blow your minds. And I'm going to tell you, you probably need another account if you're a homeowner. So this is for my homeowners who are listening. Most houses are a kit, you have purchased a kit that you are never going to be finished with. You're going to paint it, you're going to repair it, the appliances are going to get old and need replaced, then they get jealous and right after you buy the refrigerator, the washer says well, you're going to buy me to it, it's normal, they have to be painted, you got drains it get clogged, it's normal. What I like to do is look at the value of a house. And again, I'm going to use a nice round number 100,000 You pick the number for your house. And if it is a really well maintained house, you may only need to put away one to 3% of the value which would be 1000 to $3,000 a year away to maintain it. If it is an older home or you have a lot of exterior you know with landscaping, trees mowing, you may need to do three to 5% Now if you thought you were saving money by buying a fixer upper, you might need 10% A year for a few years to get on track. So this $100,000 home that I have, I gotta have another account to prepare for those things are going to happen. And I may need to be putting three to $5,000 A year into that account. out and for some of you are going to be I can't do that and afford the home, you probably can't afford the home because if you don't do the repairs and maintenance, the bill gets bigger. The longer you let it set, yeah. Yeah, and, and most budgets don't include that. I don't usually see that. But when you're planning out your cash flow, and of course, we're talking about, you know, divorce and really looking at what's going to be viable. These are the things that we need to have to make your financial foundation a solid one. So you can take care of some of that stress. And that worry, and that ticker, let's be candid, yeah, for whatever happens.

And I think what you know, that piece of advice, I think, is gold. And I really just want to kind of just highlight it again, a house is an asset, but it's not like an asset, like a savings bond that you just put it there, and it just keeps making you money if the property value may go up, but you've got the maintenance, and every year your house gets older, there's a greater risk that there's going to be higher maintenance costs. I mean, you just you don't know, right? You can have a you can have insurance, you can have everything else, but every time you put a claim against your insurance, that's gonna raise your rates. So you there is this, like, I love that idea that it's a kit that you're just going to kind of keep working on and never quite ever going to finish. So those are two really important points, Amy, that you brought up about the irregular savings account, or I'm sorry, irregular expense account that you need to save for, and also the home account that you need to save for, is there any anything else that you're thinking should be a priority to consider or look at?

Yes, yes. Because again, when you're coming into the situation, and again, I believe our audience is, you know, diverse, but we're going to have a common topic of divorce and planning your finances. Some of you are really going to struggle with whether you should keep a home or whether I'm going to rent What am I going to do. And so I'm going to teach you very quick, the 1% rule. So 1% rule. When I'm having to make a decision on whether I should buy a home, or I should rent, the objective is for me to be as financially stable, wealthy as I can be over time. That's what it is, whether I'm a homeowner or a renter, because those of you who buy a house or have ever bought one, did you ever see a clause that it said Your house is guaranteed to appreciate and value? It's not in the contract, folks, there's no guarantee. But if I am trying to make a decision, and I have a neighborhood pick any neighborhood, and I'm going to use the round number again, let's pretend that I am looking at a $200,000 home. Can I rent a similar home for less than 1% of the value per month on a $200,000? Home? That would be $2,000 a month? $300,000. Home $3,000 A month doesn't matter if I can rent it for less than 1% of the value. There is no point in me owning the property because I am opening myself up for all of the liabilities of the insurance, the taxes, the repairs, depreciation, appreciation, what if the neighbor had goes to hell? Sure. And I want to get out. You can't always do that. You know, things happen. You don't want to be the news. But you ever watched the news on some things that have happened in neighborhoods? What do you think happens? Yeah, that plague Ooh, looks awful. Or things are changing. So we use the 1% rule. Now if I'm looking at buying a $200,000 house, and when I look at my principal and interest, I looked at the cost of insurance, I look at what my tax my taxes are going to be. Remember that repair account, you know, three to 5% that I've got to have for the repairs. Oh my god do I gotta pay somebody to do the lawn? Am I going to the alarm cable you start adding all of this up and you realize that it's going to cost you 1.4 to 1.5% of the value and folks you are not getting some big tax break. Don't buy that? Yeah, it Do you really want to pay one and a half percent of the value to own this home on all the liability. Or can I rent it over here for $850 a month and call somebody when it breaks? Right? If I don't like it here, I can move on. And so think about when you're doing some of that whether you really want to be a homeowner and if you can do it for less than 1% Don't buy and I think that is a your money you don't have to spend for the lifestyle because you're buying a lifestyle. You're not buying the house, you're buying the lifestyle

that is so important because I hear so many people that have bought into the house is the biggest asset in this relationship or this is the thing that I want to take out of this relationship because this is my biggest asset. Yes, it's your biggest asset but it's also your biggest liability. So is that really like it I love that it doesn't make sense for me to have this, or would it be more beneficial? I mean, like you say to rent or, or even, you know, if you rent for a couple of months, see how the markets go or wait till you get your business started or you get in you make the decision what you want to be when you grow up, if you got through the divorce, you have a whole world of possibilities. So just having that that is a wonderful example. Amy, is there is there anything else that you think that we should kind of focus in on we we've got we're we're almost at the end, this has been really fascinating. I'm thinking maybe we need to have you come back and talk about the business side of this, it for for people that are starting new businesses, so but is there anything else that you think that people going through the divorce really need to think about that maybe different than what they're hearing from their friends, their families, about the financial stuff,

the titling of the assets, hands down, let me give you some concrete examples. I don't care what the divorce decree says. My ex and I have three hypothetical credit cards that are in both of our names, they were taken out in both of our names. And the decree says that he pays two and I pay one, that piece of paper came after the time that we had opened the account in both of our names, that piece of paper does not negate my responsibility to pay the balance back. If my ex chooses not to make payments on those accounts, or they pay him late, I am still responsible for them. And it's going to show up on my credit report. And so that's going to ding my score. The other thing that's going to happen when I try to get credit, it's going to show that I am liable for those all three credit cards no matter what the divorce decree said. Because if I have to make those payments, that affects my ability to get a loan anywhere else. So on the credit cards, you definitely want to close them. If you can get and have the conversation to wow, this would be a great time to do a 0% balance transfer, and let's put it in your name. And have that as part of your exit strategy to give both of you a better foundation. And really separate. Some of you will make the mistake you've already mentioned the house, we're going to go back to that titling, you have a house and there was a loan against the house both of you were on. Remember, it's going to show up forever until that thing is paid off or sold. With that you have decided or you were advised to go ahead and sign off your ownership in the home as a part of the asset split. Right, right. Let me think about this. I have given away the asset that I am still liable on paper to pay that the mortgage company. No, no, no, you want that house, you're going to refinance that house, and it's going to be in your name Zoli get me out of the equation. You want my equity, go refinance, you can't qualify to refinance. That's not my problem, then I guess we're gonna have to sell it and you can go buy another one.

Yeah, we'll split the assets or whatever. Yeah, do not want

to agree to give up your rights for any equity or anything in the home and you're still stuck on the mortgage if they cannot refinance it. Too bad. So sad. I guess you're gonna have to sell it. Because there is no wiggle room here. The same is going to apply. Think about a car note. Did you do a car note together? Anything that you did? We want to very cleanly separate those lines, because this is going to affect you for years to come on your ability to borrow? Yeah. And then does that make sense?

Yes. And I that's that's one thing. I think lawyers, I think I hear a lot of attorneys talk to their clients about that. If you're going to keep the asset, you're going to assume all the responsibility for the liability. And I'm hearing a little bit more conversations like that, which is positive because you're right, if not, people were doing exactly what you said they were signing away their their name on the deed, but they were holding the liability if the other person defaulted on any payments. So

exactly. And there's a couple of points here that that I see. And yeah, we could probably do another show. If you invite me back. I'd love going to Yeah. Let's talk a little bit about a quadro qualified domestic relations order. Some of you are going to have that because there is a 401 K there is a pension plan. There is something with a balance in it in the decree. I recommend, I'm not an attorney. I just have to help process the papers on the other side of the desk. I recommend on your quadro that it say it says something like the ABC Company 401 account owned by Amy is It'll be divided 50% Based on the valuation on March 31 2022. Or it could may say the date that the divorce is final. Yeah. Yeah, I want to date. Yeah, it could be the date you separated or whatever. And the reason we want a date is so there is no question when it comes time to divide the account of what the dollar amount is, because let me give you a concrete example. The it was invested in a stock account. So it's an account. And it was worth $100,000, when we were putting all these papers together. And I thought I was gonna get 50 grand isn't 50 grand half of that account, I thought I was getting half of that account. Well, when the papers got turned in, and there really wasn't a date, we finally got this done and had to go back to court and the judge and I've ever read, but but it was spent a lot of money to get this right piece of paper. So they go in, but now the account value has dropped, the account value has now dropped to where it is $60,000. Now I'm getting 30. Now, if my decree would have said 50% of the balance on that date, I would get my $50,000. And if there was only $10,000 left in the account, so bad, so sad, but I am protecting my financial future. And then when you have these quadros, as I say as soon as the gavel falls, I want you to run to that company to find out what they need to put that in your name. I've seen instances ended up in court as an expert witness on the one where somebody didn't do it for almost 10 years, they thought their attorney was going to do it. It's not the attorneys job. It's your job to do the Quadro yours, let me be specific. You, you only you, you gotta get help. But you are responsible for this. I don't care what's written on that piece of paper. This particular individuals almost 10 years later, they had remarried, they had a new wife, the papers had never been filed, of course, you know, they died when they died, and they paid the money out. And then it was afterwards and said, Oh, well, I probably should go claim that the money was gone. Yeah, the company had done nothing wrong. He had changed the beneficiary. That was his current wife, there was no papers that had ever been filed, saying that she was entitled to half of the account. Right? Right. That was a huge blow to her financial future. The only option she had was to sue the estate, which happened to be partially going to their children. How do you feel about suing your children to try to get

your money back? Yeah. And you know, that anyone

who had no legal responsibility to give you a dime, she

didn't do anything wrong. Right? Right. And that that that is a really good example. So what I'm hearing you say is if you get anything in writing that you are not, you need to have a date on it, you need to make sure you follow up immediately and find out where you need to file who you need to contact who needs copies of that paper. And if you're not sure, ask your attorney because they can they can say we're not dealing with this, this is something you've got to do. Or talk to somebody like Amy Rose Herrick, who has the ability to be able to assist you and support you through that. And hopefully and I always recommend to anybody I work with in divorce coaching that they should have a financial advisor, helping them strategically plan because we didn't even get into all the tax stuff that can come and we're our time is actually almost up. So that's something else that is something really important. I know that's an area of expertise for you is dealing with people with with tax issues. So Amy, you you have given us this fountain of information today. What do you think is the one takeaway you want people to remember from our conversation? When you are

doing any type of financial planning, you are in the driver's seat. Now whether you decide to leave and through your destination with a roadmap, or without one, you're going to still arrive somewhere, it's not possibly going to be the destination you had in mind. So what I'm trying to give you are some of the tools that you could use on your financial roadmap that we've talked about irregular expense accounts, titling of assets, how you some structure some things, but it's really up to you on whether you decide to use a map or just let something happen, but you're going to have very different results. And I will try to give you one last little phrase as I close here. spectacular results are preceded by a lot of unspectacular preparation.

That is phenomenal. That's a great that is a quote. I should have that up on my walls. That is fantastic. And I think I'm just going to throw in there like seriously even if you don't have A huge estate, you still need to have somebody, take an individual look at your financial situation to be able to give you the advantage not to mess the other person over. And I heard Amy say that several times this is just to protect your financial interest, this isn't pulling any fast ones or doing anything else. It's just making sure that you have the protections afforded to you when you're going through a divorce. And, Amy, I definitely want to have you come back because a lot of the people listening are business owners or thinking about starting their own businesses. And so I would love to have you come back at a later date and talk a little bit about some of the financial considerations around that. Is that something you'd be

willing to do? I'd be more than happy to do that. Because that's a little different realm. Yes. This is such a really large topic, because there are so many dynamics that go along with it obviously divorces, there's a lot of financial that is involved, it just is the nature of it. And for some of you that I'm gonna throw this out, some of you don't want to be divorced. But let me let me fill you in on a little secret that nobody has shared with you yet. When you are married, I don't care who you're married to. If one person decides that they want a divorce, as a bonus, the court gives out a second one to their partner. You don't have to want it you don't even have to agree with it. But that's the way the system works. And sometimes if you cannot salvage the marriage, if you've tried that, understand that you may just get the bonus. And you got to work with a bonus whether you like it or not. Yeah. Yeah, it's just what you need to do.

Yeah, you can't make somebody want to stay married to you if they don't want to no matter what a wonderful person you are. So that's another Yeah, that's another important topics. So any people want to get in touch with you find out more about what you do? Or they want to have you work with them financial as a financial planner or advisor or consultant, where where would they get ahold of you? How can they?

Well, I'm assuming you're all busy people just like we are. So in the shownotes. Marty is going to have that down with a couple of different ways that you can get in touch with me. And don't hesitate to reach out if I can be of help. And if you've got you know an advisor, listen to what they say definitely engage their services. You're engaging an attorney, engage your financial advisor, if it's a little late in the game, engage your financial advisor anyway, right? It's never too late.

Right? Words of Wisdom. Thank you so much. And this is Amy Rose Herrick, and I think,

have a blessed day everyone.