Downsizing the Family Home: It Can Be a Smart Financial Move During Divorce

Priorities change as people move on with their lives after divorce. Many parents are faced with the need to downsize their lifestyle including the family home. The hours spent on home improvements and maintenance for a full-sized home are more of a burden. As kids move on, there’s all that unneeded space. The monthly bills may simply be more than one parent can handle alone.

A CERTIFIED FINANCIAL PLANNER™ professional, or Certified Divorce Financial Analyst  may not be able to help you sort out what dishes and furniture to sell or give away, but he or she would make a good first stop in developing a complete downsizing strategy involving assets, investments, career and overall financial lifestyle planning.

Handled correctly, downsizing can save a lot of money. Selling a larger home – especially if it still has a mortgage – in favor of a smaller house or condo can potentially save tens of thousands of dollars in interest payments over time while still building equity. The earlier the process starts, the better.

Get advice first: Downsizing should be a holistic process, a chance for a check-up of your overall finances while identifying things, expenses and habits in your life that you can jettison. A CFP^® professional can give you a push by asking important questions that will get you to a better place financially. It’s helpful to set up a plan to extinguish debt in all of its forms and move on to a check-up of savings, investments and estate matters.

Start thinking about new places to live: Today’s divorcees don’t necessarily have to move to predictable local condominiums and apartments filled with the neighborhood’s recently divorce parents. Decide what kind of home you could see yourself living comfortably now and when your children are grown. To get you thinking and hone your expectations, start looking at local newspaper ads and visit websites like Realtor.com to seek information about current listings. Keep your finger on the pulse of the neighborhood so you can be sure to know when a good deal becomes available.

Talk to your family: It is important to discuss expectations with your children. Many parents use their children as a reason to place themselves under financial hardship in order to retain a family residence. Chances are good that those same children when given the choice, will choose to see their mother happy and comfortable in a smaller, more affordable home, over watching her rip up floor boards to heat the McMansion.

Start weeding: Physical downsizing isn’t something that’s done quickly. Give yourself some time to go through each room in your home and prioritize what you’re really going to need if you move to a smaller place. Make a list of what each party will take to their new residence, what you hope to give to friends and family members and what you’ll donate or trash. Time will give you more opportunities to put good, usable items in the hands of people who could really use them. Develop a recordkeeping system so you won’t forget any decisions you’ve made along the way. You might want to set up a separate area for family photos and other keepsakes that have high emotional value and an egalitarian system for who will get what.

Don’t start upsizing later: When you do move, chances are you will need to invest in some new household items or possibly furniture to match new surroundings. Try to avoid going overboard. Make a permanent life decision not to start re-using credit cards or mortgage debt.

Justin A. Reckers can be reached at:

Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.

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Tags: Divorce Financial Planning, Financial Life After Divorce, Justin Reckers, Pacific Divorce Management, Post divorce financial planning, post divorce wealth management

This entry was posted on Monday, March 1st, 2010 at 7:55 pm and is filed under Divorce Financial Planning, Marital Home, Post divorce financial planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.