You Can Achieve Financial Freedom: How To Better Manage Your Money

On the Self-Care Goddess Podcast episode #99, Leah Hadley who is an Accredited Financial Counselor, Certified Divorce Financial Analyst (CDFA) and founder & CEO of Great Lakes Investment Management, talks about financial solutions and guidance before, during and after divorce to help women secure financial confidence and independence. Leah is also an award-winning financial planner and author with 15+ years of experience as an investment analyst and financial empowerment expert. This podcast is full of some amazing and practical tips on how we can better manage our money.

The following information are just a few of the golden nuggets from my insightful conversation. Listen to the entire episode here.

Why Must We Create A Plan For Financial Freedom?

Financial planning is doable and can be learnt by everyone. However, there is a lot of shame and resistance from people who are raised to not talk about money. Many find it an uncomfortable topic and feel discomfort while having financial talks because of lack of knowledge or limited vocabulary to have money related conversations.

During challenging financial times, gathering appropriate resources and careful financial planning is critical. It is important to analyze and help people understand their own financial situation so they can manage money with confidence post a divorce or any other challenging situation in life. Here are some important steps to increase financial confidence:

  1. Understand your relationship with money by paying attention to how you interact with money. People who have empowering experiences while growing up feel in control managing money but some people feel like money has control. Money doesn’t have control; it is just an exchange of value. When we pay attention to our mind and thoughts, some fears around money can be addressed specifically. For example, if we are worried about not being able to make ends meet then formulating a plan to generate more income / reduce expenses or both must be considered.
  2. How to allocate cash? Get money to work for you to keep up with inflation. This involves planning and figuring out what to prioritize. If you have idle cash that is not earning anything, move it into a savings account and earn 4-5% interest.
  3. Empower yourself to learn on your own. Find out ‘what is your biggest concern? Where is the lack of confidence?’ This is a mindset shift uncovering some limiting beliefs that you may have towards money, considering how and where you grew up and your parent’s concept of money.
  4. Do not look at a balance sheet in the current static moment, instead think ‘what does this mean for my future?’ For most people a divorce is the largest financial transaction of their life and getting professional advice on any big transaction is important for long term financial confidence.

Would you like to learn 5 Ways to Kick Start Your Self-Care Journey at Home? Listen to the Self-Care Goddess podcast episode #6.

How To Create A Financial Plan?

  • Where you are NOW is your starting point. Everybody can have a financial plan without judgement and regardless of their level of wealth.
  • Identify your goals. What are you trying to accomplish and achieve? What are the steps needed to get from point A to point B? Break them down simplistically.
  • Look at all the aspects of your financial life and get clear on how to optimize and manage risk.
  • Be proactive to feel financially secure and ensure you have substantial savings to deal with emergencies.
  • Have appropriate insurance coverage. Analyze risks in a tangible way and create a plan to deal with them.
  • When to start investing depends on your goals and overall financial situation.  Remember investing is “investment, not gambling”. Investments are long term over 5 – 30 years so make sure you are not going to need that money.

Check out the blog post of my amazing and truly inspiring conversation on episode #29 of the Self-Care Goddess podcast “How To Build YOUR Resilience For Better Mental Health.”

Common Mistakes When Aiming For Financial Freedom

  1. Most people don’t know what they don’t know. Unfortunately, there is lots of bad advice online. People take online information and apply it to their life but it might not be relevant for their specific individual situation for different reasons, resulting in big tax blunders.
  2. Many well-educated people are the first in their family to have accumulated enough wealth to deal with ‘how do I manage wealth?’ We can find ways to consolidate and reduce the interest on credit card debt where people have been spending 1000s of dollars more than they need to because they are unaware.
  3. Being underinsured. Make sure that you have protection in place for your family.
  4. Making fear-based decisions. There is a lot of predatory marketing that preys on people’s fears. Understand what you are getting into, especially if you are investing in a specific product, know the pros & cons and risks & rewards. Make an informed decision and not a fear-based decision.
  5. Do not start investments without savings set aside for contingency expenses or you may have to sell the investments when the market is down to deal with something if it comes up.

Do you know “How Yoga Can Help You Detox – Mentally, Physically & Emotionally”? Listen to the Self-Care Goddess Podcast episode #25 with Hitu Jugessur.

Financial Planning During Divorce

During a divorce people are in a middle space with an unknown future where everything is changing so it can feel overwhelming. Here are the first 2 steps a woman going through divorce should take to prevent her financial worries:

  • Get clear on the financial situation. Regardless of how involved you’ve been in the family finances during the marriage, in the divorce process, get clarity on the financial situation so that you can create plans around them and feel more in control. The earlier you do that; the sooner you can plan for the future.
  • Analyze the initial picture, where is income coming from? When does it come in? What are your expenses? When do they go out? What are your assets (what you own)? What are your liabilities (what you owe)? A clear picture of the current financial situation allows you to have some idea of what the post-divorce financial situation is going to look like and let you know the adjustments that need to be made.

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Divorce & Home Ownership Considerations

Interest rates have gone up significantly in the last couple of years. Most people who have a mortgage on their home, have a fantastic interest rate. If somebody needs to refinance, they’re probably looking at an interest rate that is at least double, if not more, than the existing interest rate. Start with what is the value of the home? Do I have a mortgage on the home? What is the value minus the mortgage that is going to be your equity in the home? Don’t look at any asset in isolation, instead make sure you are looking at them in broader context of the marital estate. How much is marital equity? Is there a separate property claim? Did somebody you know get a gift that was used initially for downpayment? Is there any other issue that needs to be considered in determining the marital equity? Here are some quick pointers you must know:  

  1. The value of your home
  2. If your name is on the mortgage or not
  3. What is your interest rate on mortgage?
  4. What is your equity in the house?
  5. If you want to keep the home, what do you have to give up in order to be able to keep it? Do you have to refinance a higher balance than your current mortgage in order to pay your spouse out? Or are there other assets that you’re giving up to refinance the same balance or a little more? What are you ultimately giving up in order to be able to retain that home?
  6. It is important to consider alternatives even if you’re set on “I want to keep this house” because you love this house, want stability for the kids etc., yet until you find out alternative options and open your mind to possibilities, it is easy to assume there are no other options. Resolving reasons why I want to stay in the home with another solution may actually put you in a better financial situation overall and improve cashflow.

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Common Mistakes Women Make When Getting Divorced

  • If you are negotiating the house, want to keep it but plan to sell it in a couple of years, then remember that when people go through a refinancing and keep the house just for a couple of years, they have the extra expense associated with refinancing and lose a lot of value in the transaction of the sale. This is often not considered while looking at the overall division.
  • Keeping a house you can’t afford due to children’s pressure “they don’t want to move” is not a good rationale because ultimately do your kids want to be living in a financially stressed environment?
  • Being “pennywise and pound foolish”. This means not taking the time to invest in understanding things. People don’t want to pay for an appraisal on their house, so they use an estimated value which can be far from the actuals and this value is used to negotiate the entire marital estate!
  • Cash gives you flexibility. “Cash is King” especially when it comes to a big life transition. A lot of people give up cash accounts, brokerage accounts and savings in order to be able to stay in the marital home.  How do you deal with the things that come up in the home? or emergencies with the kids? or a job loss? Having access to liquid savings gives the financial security & peace of mind. It gives you options, flexibility and the ability to make more choices than when you don’t have access to cash.

Listen to the Self-Care Goddess Podcast episode #62, “Embody Your Full Potential: Break Free From Fears & False Perceptions.”

Take Home Message

Follow your heart. Financial planning, confidence and knowledge is important to help people understand the importance of financial freedom at any age so that you can enjoy your later years and not have to just survive. Money stress impacts you on every level, physical, emotional and in different areas of your life and relationships. Gaining confidence and feeling in control to manage your money with a plan that you know how to execute is empowering and important for everyone.

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