In this episode, Jaime’s joined by Rick Salmeron, a Certified Financial Planner and Founder of Salmeron Financial. Rick specializes in guiding individuals through the often-overlooked financial advantages of divorce, and he’s seen the hidden silver lining within this life event and the powerful opportunities it can bring. From taking control of your financial ship to exploring investment strategies and unexpected retirement benefits, Rick sheds light on how divorce can serve as a catalyst for building wealth and securing a brighter financial future.
Need help from Rick? Contact him by visiting www.salmeronfinancial.com.
Note: Our Podcast, “A Year and a Day: Divorce Without Destruction”, was created to be heard, but we provide text transcripts to make this information accessible to everyone. All transcripts on our website are created using a combination of speech recognition software and human transcribers and could contain errors.
Jaime: Welcome to A Year and a Day. I’m Jaime Davis, Board Certified Family Law Attorney at Gailor Hunt. On this show, I talk with lawyers, psychologists, and other experts with the goal of helping you navigate divorce without destruction. In this episode, I’m speaking with Rick Salmeron. Rick is a Certified Financial Planner and Founder of Salmeron Financial, a boutique financial planning firm that specializes in helping deeper sayings pursue financial independence and security. Rick and I will be discussing the little known the financial benefits of divorce. Thanks for joining me, Rick.
Rick: Thank you, Jaime. Love being here.
Jaime: So normally when someone is going through a divorce, they are concerned with the financial losses they may experience in connection with dividing their property with their spouse or with the increased expenses associated with operating two households instead of one. I understand from you that there may actually be some financial benefits of divorce that many people are not aware of and don’t take advantage of. What are some of those benefits?
Rick: There’s a silver lining with every cloud. Divorce as we all know. It’s not a great life event, however, it can be very great in many respects. And one of those areas is money. In my view, I’m divorced myself when this occurred. Eight years ago, nine years ago or so, and I saw personal wealth. Go from this and I’m holding up my hands about a yard apart down to this and that was like a half, right? We all experienced that, those of us who’ve been through. See money. Half of our money go out the window. So that can really feel like a crushing dagger in the stomach. That’s how I felt. However, there are benefits. Money benefits to getting divorced. In my view, one of the biggest ones is the ability not only to build that wealth back, but to do it in a manner that is true to you and your values. Just picture a white canvas. You have a white canvas in front of you. Now you are in command of directing and dictating your financial shift moving forward, which means that you’re in control of how that money is spent. You’re in control of how that money is invested. You’re in control of how you allocate the resources that you have. And you may find as a result of that, you will get to that level of wealth that you once did experience. In a much faster way than you would have imagined. And when that happens, that creates and propels a momentum inside you. That your battery begins to grow and it begins to block the pace that it goes beyond what you could even imagine. So one of the big benefits to me when I’ve experienced with my clients who’ve been recently divorced as well as myself personally. Is that you can start anew, you can start afresh, you’re now behind the wheel, you’re behind the financial ship, you’re in command. So you don’t need to, the debate, the argument, the back and forth of why are you spending money on this? And why going to bed at night thinking, gosh, this is such a waste of money. Why are we doing this? Those are, that’s gone. That’s gone. I had one couple I remember, they’re still clients just separate. And I mean, they divorced, but the ex-husband and the ex-wife are still existing clients. And I remember her, lamenting for the longest time. He was a big basketball fan. And they lived in San Antonio and he was a big San Antonio Spurs fan. And they were dropping thousands of dollars. I say dropping. I mean, it was valuable to him to drop thousands of dollars on season tickets to go to the NBA basketball games at the Spurs Arena. And to her, she didn’t care for that at all. And she she just saw that as an empty hole. Where money was going down and didn’t see the reason behind this kind of expense and that, in addition to many other things, added to the rife and the arguments and, and the, and so on to the entire relationship. So what I’m saying is when you get divorced, you can start from a new square one and direct your money in the areas that are valuable to you. And only you. And when that happens, that creates an energy. In your money that creates an energy in your personal finances that makes you feel better, that makes you feel more motivated, more inspired to do wise things with your money too. And when that happens, you can watch your money grow. At a pace that you’ve never experienced before. That can happen.
Jaime: That’s an excellent point. I mean, one of the big reasons that marriages often fail are disagreements about money and you know, different people value different things and one spouse may be a saver and the other one’s a spender. And, you know, I think it can bring a sense of peace when you’re at that point where you have control over your own finances and you’re directing where that money goes.
Rick: Definitely. And that can also, to investments too. This is another benefit that I would like to add to the list. Is that being in control of how your money is invested, not just necessarily how do I spend my money, but how do I invest my money? And what happens to those investments moving forward, that can be a huge shift on people’s balance sheets after they get divorced in a positive manner. I’ve seen, I’ve experienced that this is the survey that the official Rick Salmeron survey, okay, that females tend to be better long -term investors than males do. And why is that? It’s simply because of behavior. Jaime, it’s the male species, we’re hunters by nature. We seek out the bottom line, to say that the rates of return are very important to men, more so than women. I’m just saying, generally speaking. And when people pursue that, when they have that kind of belief system, They tend to behave in manners that are not good, that are unhealthy long-term. Moving directions, moving from one investment to another, jumping from this to that because, oh, my XYZ fund was not doing great this month, I need to get out and get into something else. When people start making investment decisions based on that kind of erratic behavior, that can cause a lot of problems and really set you back many, many, many months, if not years. So for the person, however, who’s got the personality of, I’ve got a portfolio, I’ve got a recipe. This is going to work with me. Let me just put it in the oven, so to speak, and let it bake and not touch it. That is a behavior that tends to be very good news for long-term investors. So when you can control the direction and the behavior. Of your retirement accounts, your investment, your college fund for your children, et cetera, by doing a hands-off approach that can really be better for the person long-term. So that’s really another benefit.
Jaime: That’s great. So you mentioned retirement. Are there any retirement benefits associated with a divorce that people may not be aware of?
Rick: Yes, there are. As an example, a tax-deferred, tax-deductible IRA account, or say a 401(k), let’s say 401(k), a person’s place of work, there’s one unique exception where a person can withdraw from that account and avoid paying the 10% early distribution penalty. So normally, with 401(k)s, I’m making payroll deductions for my paycheck, they’re pre-taxed, I’m not getting taxed on that money as it goes in. As it grows, I’m not getting taxed. It’s only when I pull out the money that I’m experiencing a taxable event. If I’m younger than age 59 and a half years old, if I want to withdraw from that account, I’m not only paying taxes that I didn’t pay, I’m paying a 10% early distribution penalty. One of the unique exceptions to that 10% early distribution penalty rule is in the case of a divorce. If I’ve got a quadra, if I’ve got a qualified domestic relationship order in effect, that will allow me to make a withdrawal from that 401(k) without paying the 10% early distribution penalty. And that can be good news for people who are in a cash crunch or need the money suddenly or in an emergency at that period of time. That it does not avoid the income taxes, mind you, but the elimination of that 10% penalty can be very valuable. So that’s very unique.
Jaime: Oh, absolutely. I mean, in situations where there’s not a lot of cash to go around. Being able to get some cash to the spouse, usually the spouse who may be relocating from the residence or maybe needs to refinance or pay down that mortgage, being able to access that without the penalty is very valuable.
Rick: It can be very helpful, definitely.
Jaime: So kind of along the lines of retirement, what about social security? Can a divorce have a positive impact on a person’s ability to collect social security benefits?
Rick: It can, and a lot of people are not aware of this. However, if you get divorced, you can actually piggyback off of your ex-spouse’s social security benefits. Meeting certain requirements. And requirements, the two main requirements are you have need to have been married for at least 10 years, and you need to be at least 62 years old. If that’s the case, then you don’t need to wait for your ex-spouse to reach full retirement age or begin to collect social security benefits. You can at that point, pull the lever yourself and start to receive up to 50% of your ex-spouse’s retirement income benefits from Social Security. This can be a newly found source of income that people may not be aware of that they should really consider and look into. Now, if you get married again later, then the show is over. You do need to remain unmarried and be of that age and be divorced for at least or be married for at least a 10 year period of time to meet that criteria. But that can be a nice. Source of income that maybe you weren’t aware of.
Jaime: Well, and interesting here in North Carolina, you know, you may get separated, but you’re still technically married. So if you’re right there on the cusp of that 10 years, to the extent you and your spouse can agree to wait on the divorce, if they’re willing to do that, that could be beneficial to you as well.
Rick: Yeah, that’s a very interesting point that you bring up. I don’t, you know, divorce happens for the reasons and do it when the timing is right. However, if there’s a reason to delay it, and if that is the reason to consider, if you can be patient because you have a future financial benefit divorced after 10 years versus nine and a half years, then I would really consider hanging around for a little bit.
Jaime: Yeah, I mean, depending upon the folks’ ages, I mean, it could impact how much alimony somebody has to pay if they know that their spouse is going to be receiving these social security benefits, their alimony obligation may be lower. So that could be some incentive to wait.
Rick: You probably have discussions like that yourself with clients. I’m sure that-
Rick: -things, right?
Jaime: Yeah. It’s very important. If you could only give one piece of advice to someone going through a divorce, what would that be?
Rick: I would say, use this period of time in your life to do the reset, to take an assessment of your money, your income sources, your expenditures. It’s a very unusual, it’s an unknown period of time, it’s very unnerving. You’ve got to fear and worry, I’m sure, about what is my financial future going to look like. What’s out of gold going to be looking like? It’s going to be shrinking. Can I get it built back once was and beyond? So it can be a very precarious situation. Just know that you have the ability to build it back. No question about it. There are certain habits that you will now begin to adopt that perhaps you didn’t before because it may be hard to be saving. It may be hard to say reduce expenses here and there where you were spending money. That might feel tough and challenging. However, what’s even more challenging and more tough. Is feeling very unsecured long-term that you may run out of money one day. We want your pot of gold to be as strong and as healthy and as vibrant as possible. So I’d encourage anyone to perform what I call financial Jenga. You know the Jenga game?
Rick: Box game. So for a period of a month, there’s one tactic I’ll throw out to anyone. Line up all your sources of income. You know what that is, but focus on your expenses. See where you’re spending your money, track those expenses, and identify the expenses as either being essential or non-essential. And it’s the non-essential expenses, those are the Jenga blocks that you begin to pull out. So that what you have left at the end of say the one month. Is the core needed expenses and the identified non-essential expenses that is now found, newly found money that you can redirect to reduce debt, to build up savings, to beef up that emergency fund, to grow that pot of gold stronger so that you can feel that financial security slowly but surely grow back like it’s a warm blanket wrapped around you on a cold winter day. When you start to be wiser and make smarter choices with your money, then life becomes a better, better life. You can support your health, you can support your relationships, you can support your family, you can support your business if you have a business, you can support the charities and the causes that are near and dear to your heart. When you’ve got things in control, in your command, and your money is reflective of your values, you are feeling like a king or a queen.
Jaime: So in your experience, are there certain expenses that people are willing to consider non-essential and get rid of easier than others?
Rick: Season tickets to San Antonio Spurs games is one.
Rick: There’s not a general rule of thumb because everyone’s got their own set of values because there could be, there could be someone I shouldn’t even have said that there could be someone say, no, those San Antonio Spurs tickets are highly valuable to But size is not. Now, I may not believe that myself, however, someone else might believe that. So spending money in that area. Is best for that person. So the core essential expenses should be the ones that reflect what is most important to you in life. And for most people, having season tickets at a sporting event may not be essential. It considered a luxury for most people. However, it could be considered a necessity for reasons that we’re not able to have. So identify though, there are expenses with everyone’s budget. That can be subject to debate, if not outright kicked out. And when that happens, you create the disposable income gap. And the only way, the only way, Jaime, for people to grow wealth and build wealth and better their financial future is when we are spending less than what we earn. There’s no other way to do it. It’s as simple as that. It’s not easy, but it’s as simple as that. So the deeper the gap we can find, the better our future will be.
Jaime: So as you have seen folks navigate this process, what are some of the big mistakes that you see and do those mistakes vary by gender? Do men and women make different mistakes in this area?
Rick: I believe that men make more investment decision mistakes than women do. Generally speak, there are other women who make silly investment mistakes also, but like I said, when a person is in hunting mode, when they are seeking out the bottom line, bringing home the bacon type of mentality, which is fine, which works in many areas of life for sure. However, when it comes to long-term assets like investments or whatever that may be, a person is applying short-term decisions and short-term actions. That’s where mistakes occur. That’s where tax problems can occur. That’s when debt can arise, when it shouldn’t. People may want to be so eager to pursue the latest craze or the latest fad or the newest shiny object and go to such extremes as borrowing from other sources or borrowing from their habits just to invest money into that they really shouldn’t be doing that. That’s like, It’s like playing with dynamite, really. So in terms of gender, I see that type of behavior more so with men versus women. Although women certainly can, we’re all human at the end of the day. So I would really caution people to be when a divorce occurs. Take a pause, reassess, reevaluate an excellent time to reassess where your money is at and where you want your money to go. For people who do not do that assessment, because this is a brand new chapter in your life, for people who do not take that precious time to make that assessment, in my view, that is also a mistake. And I encourage people to be doing that assessment right now during this life event. It’s a great opportunity to do it.
Jaime: Are there any financial decisions that a newly separated person just shouldn’t be making before they know what they’re going to receive in their settlement?
Rick: I would not go on a shopping spree. You want to be more conservative with your money than ever before. Because of the unknown. You don’t, it may appear to be. Very amicable and friendly at the moment. However, as you can attest, I’m sure Jaime, that divide can split apart pretty fast, pretty quickly. And next thing you know, you’ve got very two-dimensity partners. Attacking one another and that becomes more expensive for them. You want to be have as large of a cushion as possible to handle what could be a longer term or deal, longer term divorce. And that can cost money to get out of. So be careful and be cautious. You don’t want to be spontaneous. You don’t want to, well, I’m just going to go on that trip because I want to get away and I’ll come back and I’ll worry about things when I get back. That’s really not the wise thing to do. You want to be more conservative and more stable and calm. With yes, your nerves, but also your bank account.
Jaime: Yeah, that is similar advice that I would give to my clients as well. I mean, one of the first questions we ask them, if they’re dependent upon their other spouse, do you have backup resources? Who are you going to turn to if your spouse cuts you off and stops putting money in your bank account? What are you going to do? And so we encourage them to be conservative as well and to make sure that they are, you know, having their support system in place in case that happens.
Rick: Yeah, yeah. It may not be a bad idea to do a credit history report on yourself too. And just, we can do it for free and we can do it, you know, once a year or so, and that’s about as often as you need to in the first place, but run a credit report history, see what debts are in your name, and make sure that you recognize everything that’s on that list. If you don’t recognize something, then there’s a red flag there, obviously, and you want to address that. If there’s a way for you to get a credit report history for yourself, as well as your future ex-spouse, that would be a very good idea so that you know what you’re facing. Who knows, there could be a tax lien that you’re not aware of you could be revealed information that may not be pretty and may not feel very comfortable. However, you want to know, you want to be armed with that information moving forward and know what you’re dealing with moving forward in the future.
Jaime: I mean, I’m surprised at the times that one spouse is not aware of the extent of the debt. I mean, it happens all of the time. And typically in marriages, you know, folks set up roles and one person’s role is to handle the finances. And, you know, that’s not the other person’s job in the marriage, rightly or wrongly. That’s just how they’ve divided the labor. But then when it comes time to separate the spouse who has not, you know, been in the know, can often be shocked about what they find, especially through a credit report.
Rick: Yeah, yeah. And that may be the tip of the iceberg. I completely agree with what you say. It’s normal for a household to have. Husband and wife, husband handles one thing, wife handles the other thing, that happens all the time. That happens. In my household too. I’m remarried, I’m happily remarried, and I’m not the person who’s cooking the meals. I would prefer that my wife do that. She’s far better at that than I am. And at the same time, I’m the one generally handling the money. At the same time, it’s important for me to know Well, A, to how to cook meals for myself. And then maybe for her to know how to get to the money owner’s name too. This is a conversation for future spouses, perhaps. However, you don’t need to be an expert in money. It’s wise to have one spouse be in control most of the time. Yet at the same time, it is also very wise for the other spouse to be very familiar on how to find that owner’s manual, how to operate it, generally speaking, or at least know who to go to to operate that ship.
Jaime: Right. I mean, there’s some of that basic information that you just need to be aware of or know how to find it. I mean, the passwords to log into the accounts, where are the accounts? Do you even know who has them? Some of those basic things you need to know.
Rick: And the digital assets, knowing how to get access, know how to get access to the phones, to the devices, to the laptops. It’s very important. Just have that knowledge because you may need to, you may find yourself needing to dive into the Quicken account. You may need to dive into the the emails and so on. You may need to dive into knowing where the credit card information, just a general knowledge of the transaction history spells out again where the household money has been going. And there may be some areas there that would be revealed that would be very vital information for you to know. Moving forward.
Jaime: Absolutely. Well, before we wrap up, Rick, is there anything else that you would like to add?
Rick: I would say if you’re concerned about how do I build my financial pyramid back? My assets have been cut in half. What do I do? And frankly, it comes down to habits. The better habits that one adopts, the stronger habits to point that ship in the right direction, the faster that that financial pyramid will be built back. It all comes down to behavior. Very little to do with investment selection. Although that is very important. Don’t get me wrong. It’s 10% of it though. The other 90% are the actions that we take and the actions that we do not take. Those add up to and translate into our financial results. Now it may not wave a magic wand and now suddenly a thousand dollars turns into a million dollars. It doesn’t work that way. However, what does happen is you’re able to move the direction in that that direction in a snap. And when that happens, the trajectory changes. And just watch over time with those good habits, with those great habits, and reducing and eliminating the bad habits that clears that pathway to build that network back and beyond. To give you that peace of mind that you will always have.
Jaime: Building the financial pyramid. I love it. If someone listening is interested in reaching out to you for help with their divorce, what is the best way for them to connect with you?
Rick: Best way for them to connect with me would be my website, Salmeron Financial. You can also find me on social media. You’ll see my vibe. You’ll see it’s a treasure trove. I like to call it Information. I’m on Instagram, Rick Salmeron. As well as LinkedIn, just look at me in both of those areas and I’m happy to connect with you.
Jaime: Well, thank you, Rick, for joining us.
Rick: Thanks, Jaime.
Jaime: Thank you all for listening. If you like this episode, be sure to follow the show wherever you get your podcasts so you don’t miss the next one. While this information is intended to provide you with general information to navigate divorce without destruction, this podcast is not legal advice. The information is specific to the law in North Carolina. If you have any questions before taking action, consult an attorney who is licensed in your state. If you are in need of assistance in North Carolina, contact us at Gailor Hunt by visiting divorceistough.com. I’m Jaime Davis, and I’ll talk with you next time on A Year and a Day.