What Does a CDFA Do Anyway?

CDFA with client

If I had a nickel for every time I was out in the world talking about what I do for a living and a woman said to me “Wow, I wish I knew you when I was going through my divorce,” then I would be a very wealthy woman.  Unfortunately, most people do not know that Certified Divorce Financial Analysts (CDFAs) exist, let alone what they do.  And yet, if you are facing divorce, it is likely the biggest financial transaction of your life.  Having someone who is trained in the financial specifics of divorce by your side can be the smartest decision you will make.

You may be asking yourself, what does a CDFA actually do?  Do I really need to spend MORE money on top of paying for lawyers and mediators and maybe therapists?  Can’t my existing financial advisor just help me with my divorce?  In this post, I will answer all of those questions and help you decide if a CDFA could be a valuable part of your team.  Additionally, I have included some example analysis to illustrate just what kind of information your CDFA can prepare to help you as you work through your divorce.

Key Services Provided by CDFAs

First and foremost, a CDFA is a divorce financial expert.  Their role is to provide a detailed financial analysis covering both the current landscape and making projections for the future given different settlement options.  The CDFAs job is not to help you get the largest settlement possible, but to help you understand the short- and long-term impacts of various property division options and to help you create a realistic plan for the future.

Budgeting

As a first step, your CDFA will help you create a realistic budget.  How much will each of you need to live on when there are two separate households to support?  This is done by reviewing credit card and bank statements to understand the current spending and then adding and removing the things that will change once everything is separated. 

Your CDFA will also help you think through things that might not be so obvious, such as who is going to shovel the snow each winter.  If that is something your husband previously did, will you be handling that chore going forward, or will you need to add a line item to your budget to hire a service?  There are a number of costs that aren’t relevant for you today but could be in the future.

Spousal and Child Support

Your CDFA can also help you understand the impact of spousal and child support on your future plans.  While you may be thinking about getting through the next year or two, your CDFA will forecast decades into the future so that you can plan for a time when maintenance payments may end.  They will also take these payments into account when helping you make decisions like whether you can stay in the home or not.

This can be invaluable in structuring your settlement.  If you have been home with the kids for a number of years, and are planning to get back into the workforce, you want to be sure to negotiate enough maintenance to get you through any required education and job search time.

Property Division

While the most challenging part of a divorce is the emotional aspect, ultimately what you are deciding is how to divide the property.  And there is no one way to do that.  There are typically things that are important to each spouse to hold on to and so that is where negotiation beings. 

Your CDFA can help you decide what trade-offs you can make so that you can keep the things you want and what the implication of those trade-offs will be.  For instance, you might want to keep the house but in order to do that you have to give up all of your retirement assets to keep things fair.  That is probably not a good decision for you in the long term.

Settlement comparison

One of the biggest questions my clients typically have is “can I keep the house?”.  Especially if the kids are still at home, having the stability of staying in the home can be a primary goal.  But rarely do people really think about what that looks like in the long term.  While it may make sense to keep the house in the short-term, what happens once maintenance ends?  If you have to sell in the future, what will that mean from a tax standpoint as compared to selling it while you are still married?  Your CDFA can help you forecast all of these things to understand if keeping the house really makes sense for you or if it will hurt you financially in the long run. 

Keeping the house analysis

Planning for the Future

In addition to the primary home, retirement accounts tend to be the largest assets that divorcing couples need to divide.  If retirement is still ten or twenty years in the future, it can be difficult to see the impact of decisions you make today on your future self.  This is where a projected net worth statement can be invaluable. 

Your CDFA can project what your net worth will be compared to that of your ex-spouse in five, ten, fifteen or even twenty years.   These projections include the impact of your future income (inclusive of maintenance payments) and market growth on your investments.  It can be a very clear way of seeing if a settlement that looks “fair” now might actually be quite unfair in the long term. 

Future net worth projections

Benefits of Working with a CDFA

While you may not have heard of a CDFA before, if you are going through divorce, it is a good idea to at least consider hiring one.  CDFAs have completed specific divorce financial planning education, well above and beyond what a non-divorce specific financial advisor has done.  They also use specific tools that help them run a number of calculations and projections on various settlement options so that you can compare your options side by side before making any decisions.  Having this level of data will go a long way towards giving you clarity and confidence moving forward.

This is likely the largest financial transaction of your life.  And it is a time clouded by emotion and stress.  Having the right professionals to educate and guide you can help prevent mistakes that you will regret for the rest of your life.  If you have not yet interviewed a CDFA or two, this is your sign to reach out now (check out your options at the Institute of Divorce Financial Analysts).

Sara Zuckerman, CFP®, CDFA® is the founder of Reset Financial Planning located Scottsdale, AZ and serving women across the country with a focus on helping women who find themselves suddenly single in mid-life, align their financial resources with their values to plan for the next chapter of their lives.

 

If you are interested in learning about how I can help you take charge of your finances as a newly single woman, please contact me at  or schedule a free 20-minute consultation.

 

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Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Reset Financial Planning, LLC, and all rights are reserved.