Divorce Diaries: Lessons From the Trenches

EP # 33: Beyond the Balance Sheet: Financial Clarity in Divorce with Melissa Murphy Pavone, CFA, CDFA

• Cary Jacobson, Esq.

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When divorce looms, most people fixate on the emotional fallout or legal battles ahead – rarely do they understand how profoundly financial decisions made during this vulnerable time will shape their future for decades to come. Host Cary Jacobson sits down with Melissa Murphy Pavone, a Certified Financial Planner and Certified Divorce Financial Analyst who brings mindfulness to the dollars and cents of divorce. 

Whether you're considering divorce, in the middle of negotiations, or about to sign your settlement, this episode illuminates blind spots that could cost you thousands. 

Visit jacobsonworkshop.com to learn more.

Melissa Pavone:

Sometimes they get brought in in the middle of a case and that could just be like they're seeing, you know, a mediator like yourself, attorney, and they're like, hey, you know, we're almost there, but we're stuck on this one issue. So sometimes the attorneys and the mediators call me and say, hey, like we're really good, we got the parenting plan, you know, but we're just, we're not sure how to deal with this family owned business. Or we're thinking about offsetting the equity in the house with a retirement account, but we want to take taxes into consideration. Can you help?

Intro/Close:

Welcome to Divorce Diaries, where attorney Cary Jacobson brings you real stories, hard truths and practical advice on navigating divorce and family law. Whether you're going through it, considering it or just curious, this is your place for clarity, confidence and resilience.

Cary Jacobson:

Welcome back to another episode of Divorce Diaries Lessons from the Trenches, where we explore the challenges and lessons that come with divorce and highlight professionals who are making a difference in the space. I'm so excited to have Melissa Murphy Pavone, who is a CFP as well as a CDFA and founder of Mindful Financial Partners, as our guest today. Melissa has spent over 18 years guiding clients through all kinds of life transitions, everything from launching businesses and changing careers to marriage, divorce and the loss of a loved one. She helps people get crystal clear about what they want out of life and then build financial strategies that support those goals. Melissa, welcome to the podcast today.

Melissa Pavone:

Thanks so much for having me, Cary.

Cary Jacobson:

Absolutely Well. I'd love to just dive in, and I would love for you to start by telling your story and talking about where mindful and mindful financial partners comes from. What does that mean in the context of financial planning and how does it shape the way that you work with clients?

Melissa Pavone:

and how does it shape the way that you work with clients? Absolutely so. My career has been in many big financial firms and they were very much focused on your balance sheet and they weren't as focused on the human in front of us.

Melissa Pavone:

And I think that there was a big disconnect in the financial world of being able to give true financial advice, because there was an asset minimum right that you needed to get in order to have that financial advisor and that fee threshold and it just wasn't in alignment with who I was and how I wanted to run my practice, who I was and how I wanted to run my practice, and I think it's really important, no matter how much money that you have or investable assets, that people really need true guidance, and I really look at it from a holistic standpoint, and that's where I want to work with people who really want to become in alignment with what they're spending and where their money is going, and I think it's really important, and so that's where Mindful Financial Partners came from and from that became Mindful Divorce Partners, where I really help people go through divorce but really educate them and empower them along the way, because, as you know, divorce is not just a legal issue or an emotional, but it's also a financial separation that you're going through.

Melissa Pavone:

So taking that pause, really doing some inner work and thinking to yourself like, hey, what does this mean to me now, to my family and in the future, and how these decisions impact your whole life right, absolutely so.

Cary Jacobson:

How do you work with a client who is going through the divorce process and do you have a team of professionals that support them through that?

Melissa Pavone:

Absolutely yeah. So Mindful Divorce Partners you know people often ask me like when's the best time to hire a CDFA? And for those of you who don't know, cdfa is Certified Divorce Financial Analyst, and so I specialize in the financial aspect of divorce and sometimes that's dividing assets and sometimes that's planning for, you know, a change of income or support payments and how we offset some of these assets right and how we divide a house in two or a retirement account in two or a business in two, which, as you know, gets really complicated. So I, along with my team, go through and the mindful piece really is the financial transparency. So it's very important to me that before people make any financial decisions, they have that financial transparency. So we want to know what we have right. I always say you need to know five numbers before you get started. It's your assets, what you own, your liabilities, what you owe, your income, what you earn, your expenses, what you spend and your credit score.

Melissa Pavone:

And those numbers will really help guide you towards making the best decisions for your financial future as you go through divorce. And sometimes I can get yeah, sometimes I get brought in in the very beginning of a case, right. Sometimes I'm the first phone call.

Melissa Pavone:

And sometimes I look at divorce as like a three-prong approach. There's the emotional, the financial and the legal. So sometimes if I'm the first phone call, I often say like hey, are you seeing a divorce coach or a mental health professional? Are you really ready to take this next step, or are you just kind of dipping your toe in the water and then that will determine if they're ready to work with me? Or you know, here I have a list of recommendations for other professionals that can help support you until you're emotionally ready to make that next, you know decision.

Melissa Pavone:

And sometimes they get brought in in the middle of a case and that could just be like they're seeing you know a mediator, like yourself, attorney, and they're like, hey, you know, we're almost there, but we're just we're not sure how to deal with this family owned business. Or we're thinking about offsetting the equity in the house with a retirement account, but we want to take taxes into consideration. Can you help us? And then the third part is kind of that post divorce. Like, hey, I'm about to sign this paper, not really sure what all this means. Like, can you just do a once over, right? Just like you guys have review attorneys to kind of look it over. I offer like a one hour. Just like, hey, what does this look like? Am I going to have divorce remorse? Like, am I missing something here? Can you look it over? So it really depends where you are in the process.

Cary Jacobson:

And where a. Cdfa can help you the the once over is an interesting concept. Concept is it that before they actually signed their settlement agreement?

Melissa Pavone:

yeah. Yeah, it's just as if you, like we, were saying, hey, go get a consulting attorney, like and sometimes it's hard right, depending if you're the mediator or the attorney, whether you're, you know, an advocate or neutral to be like, hey, there might be that power imbalance here or a financial literacy imbalance, and that's kind of where I like to come in and say, hey, you might not be the CFO of the family, right, you might not have made all the big decisions. Perhaps you were the one that did the day-to-day and, you know, did the food shopping and all of like the kids' activities, but not necessarily who the accountant is where the investments are where the insurance is held, and so I really like walk my clients through that, understanding what they have now and

Melissa Pavone:

what they could have later after that process. So it's really important for people and sometimes, honestly, they're intimidated, right? There's some shame in coming to the table and not knowing, and I want to like get rid of that shame, excuse me, and tell people like it's okay, we're here right, like we're here, we're going to move on. You're going to always know what your numbers are after this, but let's align you with professionals that really want to educate and empower you so that you can make the best decisions moving forward.

Cary Jacobson:

Absolutely, and this is something that I see regularly, especially when I'm working with couples in mediation.

Cary Jacobson:

You know, I do a typical initial consult and one of the things that I'm trying to gauge is do both people feel like they have the information about the finances and were both people involved in being the CFO of the household or at least understanding what all of the assets are? And when I find that there is that knowledge imbalance about the assets, then I really do my best to make sure that they are both, you know, have that transparency, and one of the things that I try to do is put it more on the onus on me so that I can see what's kind of going on. And so we do like a shared Dropbox of all of the documentation so that I can better kind of explain it. And if I find that it's going to be helpful for the couple to reach a resolution, I will absolutely recommend working with a CDFA so that that person can get knowledge, because I don't find that you can reach an informed decision on how these assets are divided until everybody's on the same page.

Melissa Pavone:

That's so good, they're so lucky to have you, because not everybody, not everybody does that and goes through that extra step. But I think and sometimes it takes a little longer on the front end but it makes for a better settlement, right and a long term solution, so that they don't come back in a year and a half and say, hey, this is not what I thought it was, this is not going to work for us, like you know, and and then we'll have to reopen their case again. So I think, a little bit more planning and it's I call it like the power of the pause, right. Like, let's just pause. Make'll say, oh, this is worth $100,000 and it could be a money market account, and then there's equity in the house, and then there's a 401k, and then there's a Roth IRA, and all of those things can have a snapshot today of $100,000.

Melissa Pavone:

But they're all not created equal, right, we can't access them the same and the consequences aren't the same. And so, therefore, I try to play that what if game right, like if we're going to trade X for Y, what does that really mean? And what's the pros, what's the cons, what's the tax consequences for trading these assets one for another? Because when you're in it, it's so hard to see past the day you're not thinking about how these decisions are going to impact your future 5, 10, 20 years down the line. So I'd like to you know, as a CDFA, very empathetic. This is a very hard time in your life, but zoom out and look at the long-term implications of these decisions and make sure that you know. You know the good, the bad and the ugly.

Cary Jacobson:

Right, and I think the one that I see the most often and gets to be one of the most complicated is one spouse wanting to keep the house and the other spouse using retirement assets to kind of offset that, and so it is very much a challenge in making sure that they both are aware of what those consequences are.

Melissa Pavone:

Yeah, and again, that's one of the biggest things I see too right, the house and oftentimes the house is the largest asset between the couples, right, and you can't divide it in half, although I'm sure people have tried, especially where interest rates are currently versus where we all refinanced that a few years ago, and it really, it really changes the conversation of you know, can we afford to get divorced? And a lot of people, I think that's their fear and the fear comes from the unknown right, because they don't know if they can afford it. They're thinking, hey, we have this one house, two incomes. We're barely making it.

Intro/Close:

How are we going to?

Melissa Pavone:

do this on supporting two households and that's really hard. So I think that financial clarity piece is helpful and I offer like a small limited scope package to go over that financial clarity piece and within those three hours of working together sometimes people say, hey, you know what, this isn't as bad as I thought it was right, I can do this. I'm going to contact Cary and start the process. Or some people say, hey, you know what, I need to save a little bit more, or I need to spend a little less, or I need to get my credit score up until I'm able to make this work. And so they do some work but either way, they have that education piece and kind of see what it could look like. But oftentimes with the house I get it right Because the house is not the same and it's easy.

Melissa Pavone:

That retirement money you didn't spend Christmas or the holidays with that retirement account. It's kind of numbers right on a page and letters and you don't have that emotional attachment to it, you don't have the memories that are there, you don't have the physical stuff you know, and so I think that is a hard piece to you know, we have to take that emotional standpoint in. But I often caution people when they are saying, hey, I'm going to forego alimony or I'm going to trade retirement equalization for the house. Can you really afford to keep this house? Because you might be able to afford your mortgage today, and just the mortgage. But are we taking into consideration if the boiler goes, if you need a new roof, like, are you going to have that emergency fund on one income now in order to be able to afford these big ticket items that before you had a two income household to support?

Melissa Pavone:

So I always try to go through that what if? Analysis to make sure it really makes sense. And sometimes and I'm not sure if you've seen this before, but like I like if you can co-own the house for a few years, depending upon where your kids are at and if you know it's an amicable situation sometimes that's the best bet because you only have a few more years and your kids are almost graduating, and then you can sell the house and then split ways without having to dip into that retirement or having to refinance at six and a half 7% interest rate. So I like doing that deep dive to lay out some of the options that are there that some people might not necessarily think about and kind of put the math behind it, so that when you're looking at the different options you know the numbers.

Cary Jacobson:

Right, I would say that in our mediated cases it's more and more often the case where they are agreeing to continue to co-own the house for the next several years, with the recognition that you know there is that low interest rate and they want to protect the other spouse who's going to remain there, you know, and they recognize that they're not going to be able to afford it by refinancing and that sort of thing. And so we're just getting a little creative on what that looks like and what the timing of that may be, and so far that has been successful for most of our clients. But it, like you said, it works in those amicable situations and where you know, you know the spouse who is leaving doesn't need that month, that cash, to to move on to purchase something else, um, or, you know, to whatever their next step is going to be.

Melissa Pavone:

Yeah, I think that's really important too. You know, there's like that, given that, take like, hey, we can co-own it, you can live here, and we can kind of be like a tenant landlord situation where maybe you pay the mortgage but if something big were to happen, right, that's a joint expense that the owners of the house would you know, then pay three months and this is that. You know all of that, that legal expertise that you bring to the table, I think is really helpful for kind of like those clear boundaries.

Melissa Pavone:

So it's not an indefinite thing and the other spouse shares in, like the risk reward of like, hey, the market could go up or the market could go down, but we know that there's like a definitive timeline.

Cary Jacobson:

Absolutely so making sure that those protections are in there so that they're both, you know, protected if something happens later. So there is that timeline that gives them some security. And I always explain, you know, if you guys decide that co-owning for a longer period of time is something you want to do, then you have the option to do that. But this gives you some framework to use as far as, like, putting the house on the market and getting it sold. Yeah, yeah.

Cary Jacobson:

I love that. So do you as a CDFA, and every you know I've worked with lots of different CDFAs and it kind of varies. Do you do both neutral work, similar to a mediator, as well as advocacy work, for like representing or working with one person?

Melissa Pavone:

Yeah, I do both. It depends on you know what type of you know divorce method they're using. I love playing in the neutral space. I'm a big proponent of mediation and collaborative divorce. I love you know part of it.

Melissa Pavone:

Right, I'm I'm being efficient because I'm saving time and money. Instead of doing two different financial discoveries, I'm doing them both for both parties. And there's a buy-in right, like let's just put everything on the table and let's make sense of it together. And I like to meet, even in when I'm a neutral, each party separately and kind of say like hey, what's keeping you up at night? What are your fears, what are your like must-haves? And so I look at it as like a financial puzzle piece that I'm trying to solve.

Melissa Pavone:

Right, we have two streams of income. We have you know X number of kids. We have one household, but how are we going to make this work between one another with the assets that we have and the liabilities we have, and and finding that really balance? Cause obviously we know nobody wins in divorce, right? But we're trying to do this as efficiently as possible and as cost-effectively as possible. And I just love partnering with attorney mediators like yourself that like to play in that neutral space and that like to be outside of court and solve these problems without a judge, having to make these decisions for the families.

Cary Jacobson:

Yeah, 100%. That's what lights me up as well, you know, in helping people craft those resolutions and finding that space that works well for both of them, and getting creative, because the alternative of going to court is not going to ultimately give them the the peace that they think that it's going to, because of all that's involved in that process absolutely well before we wrap up. For our listeners who want to learn more and maybe explore working with you, what's the best way to reach out to you and learn more about your services?

Melissa Pavone:

Absolutely. My company's name is Mindful Divorce Partners. Again, I work in person here in New York. We're virtually all over the country, said in a neutral capacity, or if you feel there is that imbalance and you just need somebody kind of in your corner to help explain, I can be your financial advocate through this process. I can come in kind of before with the financial clarity package as a limited scope to try to just see what it could look like before you contact Cary or another attorney, mediator, before you get that legal support. I can help you in the middle of mediation. Or I can help you after for that post-divorce transition, which is also a really important piece to make sure that, like now that things are done, you're on track to start saving for your own retirement and making sure your cashflow is in need because of all the changes that have you know happening due to divorce.

Cary Jacobson:

It sounds like you kind of give a full scope of different services for people, no matter what process they're in and kind of where they are in any of those processes, so that's wonderful. Well, melissa, thank you so much for your time today. Your approach is so inspiring and reminds us that finance is not just about numbers. It's also about the actual person themselves. And to anyone who's listening, please reach out to Melissa. If you could benefit from her services and if today's episode resonated with you, please think about sharing this episode and subscribing for next time. I'm your host, Cary Jacobson.

Intro/Close:

Thanks for joining us today on this episode of Divorce Diaries. Remember, every journey is unique, but you don't have to navigate it alone. Visit jacobsonfamilylaw. com or call 443-726-4912 for support and guidance.