Latest / Marci talks money (and life) / Divorce, Money, and Financial Planning with Melissa Murphy Pavone
Transcript
- Marci Grossman (00:15) Hello, I am MoneyMarci. Welcome. I am thrilled to welcome today's guest, Melissa Murphy-Pavone. Melissa is a Certified Financial Planner and Certified Divorce Financial Analyst with over a decade of experience helping individuals navigate divorce with clarity and confidence. As the founder of Mindful Divorce Partners, she specializes in collaborative divorce planning, financial education, and helping clients make informed decisions during one of life's most challenging transitions. She is the author of "Divorce by Design", a practical guide to building the right divorce team and protecting your financial future. Welcome Melissa. Melissa Murphy Pavone (01:00) Thanks so much for having me Marci, I'm excited to be here. Marci Grossman (01:04) I'm thrilled to have you. I'm trying to understand a little bit about what you do. I guess I should say I understand a little bit about what you do, but it's much bigger than that because it looks like you're a mediator, but you also work with divorces that are handled by attorneys and all of those other things, a big piece of that puzzle. Melissa Murphy Pavone (01:25) I am, I am, and I can come in at different parts of the timeline and act in different capacities too. So hopefully by the end of this talk, you'll understand a little bit more. Happy to answer any and all questions you and your listeners may have. Marci Grossman (01:40) Okay, well, to my mind, I guess the best way to describe you would say you are a divorce-centric Financial Planner? Melissa Murphy Pavone (01:48) Yeah, I am a Certified Financial Planner and a Certified Divorce Financial Analyst. And if I am helping you during divorce, I have my CDFA hat on. I'm not giving investment advice per se, right? I'm not saying, OK, we should change this into your 401k, or we should move this out of international into domestic. But I'm more saying, hey, before we say we're gonna keep the house, let's talk about the tax consequences of if we were to sell this house in the future and what that looks like, right? And let's see if trading equity in the house for retirement assets makes the most sense for your new financial future. So it is very much, helping you get through the transition of divorce, but looking at future you, which is really important. Because when people are in divorce, it's emotionally exhausting, financially devastating, and they're honestly just trying to get through the day, right? They're not really looking and they can't, right, have the capacity to look past the day to say, are these decisions that I am making today going to impact me in the future? So I have the ability as a CDFA to zoom out and look to see how this will play out five, 10, 20 years down the line, these decisions, how they'll impact your future. And so I talk a lot about future you, right, and how future you is going to thank you for meeting with a CDFA and thinking this through and not doing it hastily, because there becomes a point in every divorce where somebody wants to throw in the towel. They're tired, they're drained financially, emotionally, and they're just like, I don't care anymore, right? I just need to be done. I need to find peace. And that's exactly when we sort of have to pump the brakes and slow down, instead of speeding up and just ripping off the bandaid. Really slowing down and being thoughtful and intentional about the next decision so they're not emotional decisions and that they're financially sound for your future. Marci Grossman (04:08) You're also a Certified Financial Planner and I assume that means you have clients that you do financial planning that has nothing to do with divorce. Melissa Murphy Pavone (04:16) It is, yes, it's two separate companies. One is called Mindful Financial Partners and one is called Mindful Divorce Partners. And so when you are done with divorce, should you need a Financial Planner, I'm happy to help you on the other side. And I have some clients that are happily married, right, or happily single, and never got divorced, and that I help with on the financial side. But it's very important to know when you're going through divorce, that your CDFA has your best interest in heart and is not looking at It in their best interest but really looking at what's in the best interest for your future Marci Grossman (04:53) Okay, and normally I start with the question of how did you get here? But because what you do involves a lot of hats, I figured I wanted to start with the hats. And then I can say, how did you get here? Melissa Murphy Pavone (05:03) Yeah. Yeah. My why is my mom. So I am a child of divorce and my mom made a lot of decisions with her heart instead of her head and it has impacted her ability to retire and it has made it my mission to really educate and empower my clients so that they really understand what they're agreeing to now and how the decisions that they're making today are going to impact their future. Oftentimes, we think we know what we're signing, but we don't really stress test it, right? Nobody really sort of plays that devil's advocate because, there's divorce fatigue, you're tired, you're exhausted, the attorney bills are piling up and you just want it to be over. And so that's where I come in to really make sure that we dot our I's and cross our T's so that there is no divorce remorse later on, right? I don't want you to regret something or wish that you coulda, woulda, shoulda. If we are educated and empowered, then we're making informed decisions through the process. Marci Grossman (06:21) So did the divorce planning or the divorce certification come first or did you start as a CFP and then expand into the divorce? I know they're separate companies but... Melissa Murphy Pavone (06:32) Yeah, I was a CFP first, so I got my Certified Financial Planner certificate in 2012, and then a couple years later in 2015, I obtained the Certified Divorce Financial Analyst designation. And it's been really helpful to help clients through that transition. Marci Grossman (06:51) I've had attorneys on before, I've had mediators before, and you've kind of got your foot, I mean you're only wearing two hats, but I think you've got your foot in way more than two steps for the divorce especially. What are the things that you do that are different than a standard mediator? Melissa Murphy Pavone (07:09) Yeah, I have mediation training. So in the state of New York, I am considered a mediator. I will not mediate a full divorce by myself. I know myself well enough to know and stay in my lane. So I often will co-mediate. So there'll be another mediator or attorney mediator on the other side that will help with the parenting plan, and drafting of the documents. And I try to stay in my zone of genius. I'm really good at math and numbers and creative settlements. I'm not so good with parenting plans, and calendars scheduling. So in that aspect, I will co-mediate with somebody to help on the financial plan. But I know myself well enough to know, when it's sort of above my pay grade, that we sort of work with somebody else. It's great when you have a co-mediation because then you have two people sort of in the same room with a couple and can see it from a different lens, which I think is really important and keep that neutrality going. So that is great. So yes, I am considered a mediator, but I will only co-mediate in that. But the mediation training was really important for me so that I can understand what my clients are going through. Right, to be, to know what training, because the clients often are doing this for the first time. So they don't know, is this normal? Oftentimes some people think that because the mediator is an attorney that they should be giving legal advice, right? And in that capacity, they're unable to give legal advice. So to know and to educate my clients to say, this...person sitting in this mediator seat is an attorney but they are not giving you legal advice and we're gonna hire a , consulting right when we're ready to sign so you have somebody in your corner double checking for you, and being an advocate for you. So I think it's very much the training I have is to help support my clients through every step of the process. Marci Grossman (09:07) As MoneyMarci, my topics are about the financial. And mediation, I think probably more so than divorce, people are going in more having the conversations about money together as opposed to from opposite sides. Do you find that you're spending a lot of time explaining the financial aspects of it or do they come in pretty well I want this, I want that. Even if they're doing it amicably, still already deciding what they want, and you have to say, well, wait, that doesn't mean what you think it means. That's not an equitable financial. Melissa Murphy Pavone (09:43) Yeah, yeah, I try to, I think it varies from couple to couple based upon their power dynamic and based upon who was sort of the CFO of the family, right? And the level of communication between the two of them surrounding finances. I think, you know, and I'm sure you can attest to this, we don't talk about money enough, right? And that's why this podcast exists, right? To talk about money and life and how important it is generationally, it's very taboo to talk about it, right? And sometimes, in a marriage, we sort of fall into our roles. And one person might be sort of the big picture, the taxes and the investments and the retirement, and the other person might be more the day-to-day. The checking and the savings and the household running. it doesn't, sometimes people come to me with shame, right? That, I don't know. I don't know who our mortgage is with. I don't know if I'm on the deed of the house. I'm not sure who the beneficiaries are or if we have a trust or a will. And there's a lot of shame there and sometimes that paralyzes people. And I try to educate them and tell them this is a safe space. We're not here to judge anybody. We're here. I'm gonna meet you where you're at. And we're gonna take that shame and we're just gonna brush it off our shoulder because it's not gonna serve us well here. And think of today as ground zero. You are always gonna know more about what you own from this point forward. And I'm gonna help educate you along the way. And I think that's really important, even in a neutral setting with a couple together to really educate so that we can level the playing field, right? One person might understand if whether they're in finance or they were sort of the CFO of the family, how these things work and what's in their best interest. And the other person, might sort of have that blind trust. And just say, okay, this looks equal, right? These two things both have a balance of $250,000, so I take one and you take one, not realizing that it's very different. I use the example often that if you have $250,000 in equity in your house and you have $250,000 in a 401k and $250,000 in a Roth IRA and $250,000 in a money market, Those things all have a snapshot today of $250,000, but they were all four very different, right? They have different access points and different tax consequences. So I really spend a lot of time with my clients educating them so that they are informed and they make informed decisions. And that way there's no divorce remorse later. They're not saying nobody told me that, right? I want clients to go in eyes wide open through this process and learn and be empowered by this process. Marci Grossman (12:34) Divorce is a huge life transition and it transforms your whole relationship with money and your whole... I don't want to say your whole future because your future is what you decide today and tomorrow but it certainly puts you at a different starting point than you thought you were at and it impacts what your options are in the future to choose from. How do you help people actively get more involved in that future? I mean they may not hire you as their CFP afterwards or maybe after successful mediations you might end up with both parties from it because they were happy with the way they felt you represented them. But how do you help them to get more involved? Melissa Murphy Pavone (13:24) I think it's really important, you know, we talk about that cash flow piece. A lot of people are stuck on the balance sheet, right, the assets and the liabilities. But the cash flow piece is really important. And it's important because we think about pensions or we think about future cash flows and people's earning potential, right? So when I'm there, I really try to break it down for them, and find out what their needs are and what their fears are because if we can replace fears with facts and figures, then we come to a place of clarity. So oftentimes some people, if they're the lower earner, to say like, hey, I don't have the same earning capacity. I took some time off of work, I work in nonprofit, whatever it is, I don't have that runway. So short-term needs are more important to me right now. And other people might say, you know what, I know that my future is bright. I have these investments or that the industry I'm in is booming and I'm gonna be okay and work for longer, but I wanna save more retirement assets, right? I wanna keep more of what I have in retirement. And so we can sort of play with those two things. So the more information I get out of my clients, the better off it will be. And we also talk, depending upon their age, how social security plays in, right? How health insurance plays in and sort of these key ages and numbers of like when we turn these faucets on and off, right? And again, we're not giving investment advice, but we're sort of letting them know, hey, you're entitled to X, but you can choose something differently. And these are the pros, the cons, and the tax consequences for each of these sort of silos, of whether it's assets or income streams, and really get them thinking about what that could look like in the future. Marci Grossman (15:16) That makes sense. I know one of the big challenge points sometimes in divorces is who gets the house without necessarily realizing of the true cost of owning that house. Melissa Murphy Pavone (15:24) yeah. It's the number one question I get as a CDFA is like, can I keep the house? And I say that the question shouldn't be, can I keep the house? It should be, is it sustainable for me to keep the house? Because oftentimes the marital home is one of the biggest assets. And again, if we think back to that analogy, right? If you have a home and there's $250,000 of equity and then you have this brokerage account with $250,000. You're sort of like, hey, I didn't have Christmas, with this brokerage account. It sort of seems fake, right? It's like a piece of paper with numbers on it. It's not really tangible. But the house, you might have raised your kids at this house, right? You have holidays and memories of the house. So there's an emotional standpoint of the house. And there's also that, I want to say, like stickiness to say, am I emotionally ready to pack this house up and move? Or sell it, right? And you might just not be emotionally ready yet. But I caution people who want to either assume the mortgage or refinance or buy their spouse out to really do the math. And that's part of the exercises that I do with them is to really lay out, hey, it's not just sell now or buy out. There's a couple of other creative solutions that we can do. Depending upon your children's ages, maybe we co-own it for a few years until they graduate. Maybe we rent it out. Maybe there's some things that we can sort of do that are outside the box solutions depending upon the family dynamics and the facts of the case. But I want them to know the true cost of running that house. And that goes back to really knowing your numbers and what that cash flow looks like because oftentimes people don't know and they say, all right, my mortgage is X. And I make Y so I can cover my mortgage and my homeowners and my taxes. I'm fine. Right? And I say, okay, but what happens if we need a new roof? What happens if the boiler breaks? What happens if the HVAC system needs to be replaced? These are all things that are not annual, these are big ticket items that require a sizable emergency fund that somebody has access to. So I don't want people to become house poor and then not be able to travel, or enjoy their life because all their nest egg is in a house that they don't really have access to. So it's really important to sort of look at that and I guide my clients to look at what this could look like. And sometimes they just need a little pause. They don't, they're necessarily like, yeah, you know, I wanna keep, I don't necessarily wanna keep this big house by myself but I'm also not ready to sell it right now, right? So maybe that just means we need a little bit more time, to sell it, that it can't just be now, right? There's a lot of variables in it. But walking them through that exercise to really know the true cost of owning that home and running that home, because what you don't want to do is buy it out at all costs, give up retirement or brokerage or liquidity, and then end up selling it later, and having a capital gain situation that nobody explained to you. So I really am thorough when it comes to the house and sort of, even if they agree and they're already like, you know, I'm dead set on either keeping the house, I really go through the exercise and illustrate out what it will look like so they know selling it now versus selling it later. Assuming the mortgage versus refinancing. Trading the retirement account versus trading something else. and really getting in the nitty gritty with the numbers. Marci Grossman (20:09) Can they assume the mortgage? I mean, if married people own the mortgage and they get a divorce, don't they have to qualify to put it all in their name? It's not just a matter of, yeah, it's mine, now don't worry about it. Melissa Murphy Pavone (20:20) Yeah, yeah, there's a whole, there's a lot of assumptions, right, about assuming the mortgage. And not all mortgages are assumable, right? You have to look in the fine print and sometimes they are, but the banks don't want you to think they are. And you know, the first line of customer service might say, no, sorry, it's not assumable, right? And so sometimes we have to get on the phone a couple of times and get to the right department and ask the right questions with a professional on the phone to get the actual answer. Because if you think about it, if you in pre-COVID area, and you have a 2.99 or a 3.5, you know, they don't want you to keep that. They're happy you're getting divorced and we could refinance, at 6 to 7%. But in all cases, you have to qualify for that assumption, whether it's an assumption or a refinance, and you have to do that on your own income. And sometimes child support or maintenance can count towards that income, but there's a set number of months, right? The bank wants to see six months of steady payments from one party to the other in order to count that towards the income for the qualification. So it's really important that you have a team, a divorce team really helping you guide you through this process because oftentimes someone will say, yeah, you have, six months to refinance and they divvy everything up, they move everything around and then six months comes and spouse A can't refinance. So now what? We already moved everything else around for this and now we have to sell and what does that look like and who pays the taxes? So it's better to do it simultaneously to make sure that we are on the right track and we know what's going to happen with the underwriters. I often work with CDLPs, which is a Certified Divorce Lending Professional. And so they know all the ins and outs when it comes to assuming or refinancing, and can really help us with the underwriting process. So that's really important to do that and not wait until after everything's signed. Marci Grossman (22:25) The other thing to bring up is just because your house has a net worth of $250,000, it could be a $250,000 house that's fully paid off. It could be a million dollar house that you have a $750,000 mortgage on and they show up on the balance sheet the same way. Those are huge differences. Melissa Murphy Pavone (22:43) Yeah. Absolutely. Yeah. Marci Grossman (22:49) So when you start, especially in the mediation, but maybe even in the divorce, that's when they have to have really serious money conversations so you can decide the right way to kind of divide these up and what comes out to an equitable situation. How often are they coming in that they haven't really had those money conversations and when you're sitting down is when you get surprises about whether it's income or assets. or debt that by the way Melissa Murphy Pavone (23:17) Yeah. Yeah, oftentimes, again, this is very case by case, but if they're coming in, there usually has been a breakdown in communication, right, along the marriage. And usually it is around the finances. And so there is often an imbalance in sort of financial literacy between the couples, but also a breakdown in that communication. So one person might say, okay, we have this nice house and nice cars and all these things and we're doing well, right? You make a lot of money, I see the tax return, not realizing that they're highly leveraged, right? That there's a lot of debt, that we're not saving towards retirement, we're not putting $2,500 towards retirement, but we are spending $2,500 a month on travel soccer for our children, right? So there's a lot of aha moments and sometimes I'm the bearer of bad news when it comes to doing it and having these conversations, but I think it's really important to allow both parties to process it, right? And have a neutral space that we can sort of disclose it, but the transparency is key there. To know that like this is, we're putting all of our, you know, everything on the table here and let's have a conversation. It becomes a different conversation when people are hiding things. And when they're not disclosing things. And I often find those things too by just the limited documents that they provide. I often will find some other things. And sometimes it's, I totally forgot about that. And other times it's, yeah, yeah, I'll get that next time. So sometimes it's intentional. Sometimes it's really that they're just not organized. But having a CDFA on the team is very helpful in that case if there is this sort of gut feeling of hey I think something's not adding up, the math's not mathing, then get a professional to sort of get a checkup, a second opinion if you will. Marci Grossman (25:20) I'm going to ask and you can say no, have you got any good stories to tell? Melissa Murphy Pavone (25:26) Well, yes, actually. I have one case that I have worked on that I was going through sort of some tracing to sort of see there was some marital waste going on, which sort of means if you're, know, sometimes it's people gambling, sometimes it's extramarital affairs, sometimes it's just people moving money sort of outside the marital estate. And so I was trying to trace some money and the tax return is a very, very important piece of the puzzle. And a lot of times people come to me and they're like, I don't have, know, sometimes they meet with me prior to having the conversation with their spouse. They're sort of quietly thinking about divorce and just wanting to see what it could look like. And I offer a financial clarity package, which is sort of a limited scope. Let's get you organized. Let's get all the documents that you need and sort of see best case, worst case. So you go in eyes wide open. And during that, oftentimes, the spouse will say, don't have access to their retirement accounts or, you know, anything in their name. We have separate logins, separate banking. So I often ask for a paystub which usually they can find, and a tax return. And those two documents will tell me a lot of information. So on a paystub on one case, I was able to find a deferred comp plan that was never disclosed. So I saw they were like putting money into the deferred comp. There was a match for their deferred comp, but it was never disclosed on any of the financial documentation. So I uncovered an account that had $300,000 in it. So sometimes people say, you know, I can't really afford you and I appreciate that I am expensive, This is not a cheap service to have a CDFA, but sometimes spending thousands can save hundreds of thousands. So I'm worth the investment. But I had another case that we had and I had the tax return and I saw, a 1099 and while I was going through the statements, it was a Robinhood account. We had an account number and we were getting documents on that but there was a second account number that had a C at the end for cryptocurrency which is the new hot thing on where to hide money and so that was never disclosed. So we are now subpoenaing records for an account for a second account that we found that had a similar account number but was missing. So there's some things that I find in there that can be helpful in mediation or collaborative or litigation if necessary, but oftentimes the CDFA, again, is sort of trained to be your eyes and ears and look out for specific things that sometimes attorneys could miss. Marci Grossman (28:07) Right. And if you're not starting from a tax return, then you're going to miss some of those things because you won't know questions to ask. And if they're not putting things on the tax return they should be, then that's tax fraud and a whole other host of issues you don't necessarily want to get into. So let's say all my listeners are happily married. I hope you are, but what are things they can do Melissa Murphy Pavone (28:29) Me too. Marci Grossman (28:34) to help start having those financial conversations with their spouse to be, you know, not necessarily a backseat driver to the CFO. You can keep running the books and whatever else, but I want to be more informed. Melissa Murphy Pavone (28:48) Yeah, I suggest that all clients should have financial date nights. It shouldn't be a painful experience. You shouldn't dread it like going to the dentist or getting a tooth pulled. But quarterly sit down, get your favorite takeout, get a bottle of wine and say, hey, let's take a look at our accounts, right? Let's open the mail together. Let's see what the balance sheet looks like. Are there any home improvements that we're looking to do? Do we want to go on vacation, right? Where are we with sort of where we are in life, with our work, with our savings, with our debt, you know, and just have those open conversations, but it doesn't have to be like a formal sit down, right? And if you get into the habit of doing that and making it light and fun, it becomes part of your normal. And then you look forward to it, right? Saying, all right, look at where we're at this time, versus last time. Look how much money we saved, since last quarter. Or hey, we have some more money in the slush fund, can we spring for that vacation. So I think if we make it fun and we change our mindset around it, it doesn't have to be budget and bad. And I hate the word budget because it reminds me of a diet. And when I'm on a diet, it's very restrictive. And I think about bread and all I want to do is eat bread, carbs, and so I like to think of it more as cash flow. Money comes in and money goes out and there's certain seasons of our lives that are more expensive than others But let's talk about it right. Let's just have a conversation. Hey, business was bad this month, we got to be a little tighter like let's wait, let's hold off on this project. Or let's wait off on this vacation or hey, you know, we had a really good season or I have a bonus, where can we allocate this? I just think having that communication is so key for couples and it helps your relationship with one another and your relationship with money. Marci Grossman (30:39) Absolutely. What do you think someone should understand financially if they were to be getting ready to be filing for divorce? Melissa Murphy Pavone (30:48) I'd like them to buy my book. ⁓ Marci Grossman (30:51) Fair enough. Melissa Murphy Pavone (30:53) It's called "Divorce by Design". And the premise behind the book is to build a divorce team. It's not a one-person job. You don't just need an attorney to get divorced, but to make sure you have emotional support, financial support, and legal support. And if you have everybody stay in their lane, you can have three people supporting you versus one person. And it's three people doing what they do best, supporting you through a really hard time. So to just go in eyes wide open and feel supported. During your wedding, there's often a bridal party, right? A team of people, there's celebrations, there's people supporting you throughout it, and it takes a lot of planning. But often when it comes to divorce, people want to do it quick and fast. And I caution you to not do it too fast and not to it too quick so that you don't have divorce remorse and that you are doing it thoughtfully and really understanding the consequences and the decisions that you're making today and the impact they'll have on future you. So really that divorce framework of building a team, feeling really supported so that you're coming from a place with information and empowerment. Marci Grossman (32:19) That's good advice. Melissa, do you have anything else you want to mention that maybe we haven't covered? Melissa Murphy Pavone (32:25) I love the fact that you're just talking about money in general. I don't think enough people talk about it. We sort of show, right, if we have money and money means things, different things to different people, right? But really becoming open and honest with yourself about your relationship with money and with your partner can save everybody and hopefully that you don't have to come see me, for divorce and I am very pro-staying married, I'm still married. And I would hope that listening to podcasts like these and removing the stigma of talking about money will have a ripple effect in the world. Marci Grossman (33:02) Thank you so much for being my guest today. We appreciate you taking the time to join us here. Melissa Murphy Pavone (33:07) Thanks so much for having me. It was great speaking with you, Marci. Marci Grossman (33:11) Thank you. And to my listeners, I will be sharing a link to Melissa's information in the show notes. Please check her out. She has a lot of interesting information. Remember, she is an investment advisor, not just a divorce advisor. And don't forget to subscribe, leave us a review, and stay tuned. I'll see you next time. This has been MoneyMarci on Marci Talks Money (and Life). You got this.