Episode Description - The Divorce Money Mistakes That Can Cost You $1000s
Divorce can quietly cost you six figures if you don't know where to look or what to look for. Unfortunately, most people have no idea how many divorce money mistakes they’ve made until their divorce is long over and they’re stuck with a result they can’t change.
Certified Divorce Financial Analyst Sue Plisch has spent years helping people uncover hidden income, decode confusing pay stub abbreviations, and catch the kind of overlooked details that can make or break a settlement. Her approach goes beyond just splitting assets down the middle; it's about understanding what a truly fair outcome looks like for your specific situation.
From hidden executive compensation and overlooked assets to retirement accounts that aren’t worth what they appear to be, divorce finances are rarely as simple as dividing everything 50/50. Sue explores some of the financial traps people commonly miss, including why keeping the family home may not be as affordable as you think, how joint debt can put your credit at risk, and why two retirement accounts with identical balances may have very different values after taxes.
You’ll also discover why preparing financially before your divorce can give you more options and more control both during and after your divorce, especially if your spouse has traditionally handled the money. From tracking your real expenses and establishing credit in your own name to finding financial information you may not have access to, Sue shares practical ways to protect yourself and explains why the way you structure your settlement can sometimes matter just as much as how much money you receive.
Show Notes
About Sue
Sue Plisch, CFP®, CDFA®, is the founder of Resilient Divorce Solutions. Drawing on more than 17 years as a mathematics educator, financial planner, and her own personal experience with divorce, Sue helps clients make confident financial decisions and avoid costly, six-figure mistakes. Outside of her work empowering clients through life transitions, Sue is a mother of three teens who enjoys hiking, paddleboarding, playing board games, and learning Spanish.
Connect with Sue
You can connect with Sue on LinkedIn at Sue Plisch and on Facebook at Resilient Divorce Solutions. You can follow Sue on Instagram at smartsplitsue. To learn more about working with Sue, visit her website at Resilient Divorce Solutions. And you can download her free e-book, 10 Financial Mistakes to Avoid in Divorce, here.
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Transcript
The Divorce Money Mistakes That Can Cost You $1000s
SPEAKERS
Karen Covy, Sue Plisch
TRANSCRIPT
Karen Covy: Hello, and welcome to Off the Fence, a podcast where we deconstruct difficult decision-making to try to figure out what keeps us stuck, and more importantly, how do we get unstuck? I'm your host, Karen Covy, a former divorce lawyer, mediator, and arbitrator turned coach, author, and entrepreneur.
With me today, I have the pleasure of speaking with Sue Plisch. Sue is a certified financial planner, a certified divorce financial analyst, and the founder of Resilient Divorce Solutions. Drawing on more than 17 years as a mathematics educator, a financial planner, and her own experience with divorce, Sue helps clients make confident decisions and avoid six-figure mistakes.
Sue, welcome to the show.
Sue Plisch: Great, thank you, Karen. I appreciate the opportunity to be here.
Karen Covy: I'm happy to have you here, and I know because you and I have spoken before, that one of the things you do is something called financial advocacy. You call yourself a financial advocate. What is that, and what do you do?
Sue Plisch: Great question, Karen. In a divorce, sometimes people like myself who are CDFAs, or Certified Divorce Financial Analysts, work as a neutral—helping both sides understand great ways to split their assets. My favorite way to work is actually to be an advocate, which means I'm simply on one side helping one party understand what they have, what a fair division might look like from their perspective, and coming up with possible settlements and offers that work for them based on their values and priorities.
Karen Covy: Let's say you're in the role of financial advocate for one person—and likely that person is the one who is less financially savvy. You're helping them understand what's going on, and let's say their spouse is potentially hiding assets. Now what? How do you discover whether someone is hiding assets, and how do you find them and say, "This is what they are, and this is what you're really entitled to"?
Sue Plisch: It all gets traced back to documents, documents, and more documents. We can look through bank records, pay stubs, and W-2s. I was just working on a case involving a highly paid executive at a Fortune 500 company. We were wondering: Is there compensation they haven't disclosed? Do they have a non-qualified deferred compensation plan? We're looking for evidence, because usually stuff shows up somewhere.
There are some areas, like cryptocurrency, where I'm not an expert, but there are specialists who can help if that's likely part of what's happening.
Karen Covy: Well, let's say there's no cryptocurrency per se, but someone thinks their spouse—a highly paid executive—might have gotten benefits or perks on the job that they forgot to mention in their divorce. How do you go about finding those kinds of things?
Sue Plisch: I comb through every detail of pay stubs and W-2s looking for clues. A lot of times, items on those documents are listed in code or abbreviations. We figure out what each abbreviation means for that company and add things up to see if it makes sense.
Other times, we might have records of money coming in, but there are significant assets elsewhere or unexplained transfers out. We look at bank statements or financial account statements for those unexplained transfers.
When getting divorced, you need to divide everything you own and everything you owe. Understanding someone's total compensation is also really important because it factors into spousal support and child support.
Karen Covy: Digging into all the documents sounds very similar to what a forensic accountant would do. What's the difference between the work you do and what a forensic accountant does? Do people need both, or can someone like you take care of all the financial information they need?
Sue Plisch: It depends on how complex everything is. I am not a forensic accountant, although I do a lot of the same things. A lot of times, I'm focused on the big picture. Assuming nothing has been hidden and we've carefully tabulated everything, it often comes down to balancing preferences—like when one person wants to keep the house and the other doesn't, and finding ways to equalize that with all the different assets.
For example, in one case I'm working on, the wife wants to keep the house, but the husband wants a cash payout. She doesn't want to liquidate assets because of the tax consequences, so I look at whether we can simply shift retirement accounts, tax-equalize things, and come up with a fair proposal for him to accept that keeps her money safe.
Karen Covy: Stereotypically, a lot of women want to keep the house for the kids and for stability, but keeping the house is not always the best financial decision. How does someone make that determination?
Sue Plisch: I like to look at the total cost of keeping the house. A lot of times, people anchor on the mortgage payment and think they can afford it, but what about utilities, repairs, maintenance, lawn or snow care, and HOA fees?
Sometimes someone might keep it for a specific timeframe—like four years until the kids graduate high school so they can stay in that school district. With my software, I can look ahead and model different options, like keeping it for a set number of years, selling it, and downsizing.
Karen Covy: You can't see into the future, so how do you determine what the cost actually will be when unexpected things happen, like a leaking roof or a blown water heater?
Sue Plisch: Because none of us can see into the future, I usually budget about 2% to 3% of the value of the house per year for repairs and maintenance. But since something major could still happen, the bigger question is: Does the person have a solid emergency fund with cash reserves?
It doesn't even have to be the house; it could be a vehicle recall. I had a client recently whose vehicle was an explosion risk due to battery problems. That compromised the trade-in value, meaning she had to put more cash than expected toward her next vehicle.
Karen Covy: Wow, that would be wild news to receive! Talking about explosions, there are financial mistakes people can make during a divorce that they have to live with for the rest of their lives. Can you give an example of a case where you helped someone avoid a giant financial mistake?
Sue Plisch: In one case, an amicable couple was working hard to divide everything up, and the wife asked me to review their plan. On paper, it looked equal. They agreed he would keep his retirement accounts, she would keep hers, and they'd split everything else 50/50.
Once I dug into the numbers, my analysis showed a discrepancy of over $100,000 because he earned more and had significantly more in his retirement accounts. When I factored in the tax impact, the gap was even worse. She was able to go back to the negotiating table, point out the discrepancy, and ultimately get what she needed to equalize things.
Karen Covy: When you factor in tax consequences, why does the discrepancy get even bigger?
Sue Plisch: There are different types of retirement accounts. Pre-tax, traditional accounts—like a traditional 401(k) or IRA—haven't been taxed yet. Even if you follow all the rules when pulling money out at retirement age, it still gets taxed by the federal government and potentially state or local governments. You might pull out a dollar and only end up with 60 cents.
With post-tax Roth accounts (like a Roth IRA or Roth 401(k)), assuming you follow the rules, when you pull out a dollar, you keep the full dollar.
Karen Covy: What if you're not 59½ yet? Does the early withdrawal penalty that applies to traditional IRAs or 401(k)s also apply to a Roth?
Sue Plisch: Once a Roth account has been open for five years, you can pull your original contributions out tax- and penalty-free. The growth and earnings have different rules, but pulling out contributions makes a Roth useful if someone is in a cash crunch during a divorce due to moving or legal fees. It's not my first recommendation, but it's an option for an "in case of emergency, break glass" scenario.
Karen Covy: In a perfect world, where should people pull money from first to pay for divorce legal and expert fees if they don't have the cash flow?
Sue Plisch: Getting divorced is expensive. I've seen people liquidate brokerage or taxable investment accounts that aren't tied to retirement.
My ultimate goal at the end of every divorce is to leave people without consumer debt. Sometimes I see agreements where one person is supposed to pay off the other person's credit card, and that is a disaster. If your name isn't on that debt, the lender won't speak to you, you can't confirm if more debt is being added, and the lender doesn't hold the other person responsible in their eyes.
I like to find funds to wipe out consumer debt so there's no joint debt moving forward. With mortgages, you may have to refinance or assume the loan so both names aren't on it. You want a clean separation so your credit isn't impacted if your ex-spouse stops paying.
Karen Covy: What if you don't have the luxury of pulling money to make a clean break? What are your options, and how can you build in recourse if they don't make the payments?
Sue Plisch: You can use a QDRO, or Qualified Domestic Relations Order. While QDROs are typically used to divide retirement accounts, you can write a document that only triggers if someone fails to pay child support or other obligations, allowing you to pull funds directly from their retirement account.
For mortgages, interest rates like 2.5% or 3% are incredible, and going to 6% or 7% through refinancing negatively impacts your finances. I always recommend seeing if you can assume the loan to keep the interest rate in one person's name. If both names must remain on the mortgage, you can include a clause where even one late payment triggers the house being listed for sale.
Karen Covy: So if your name is still on the mortgage, you have recourse to sell the house if your ex doesn't pay?
Sue Plisch: Exactly. You need protection so your credit score isn't dragged down by unforeseen events in their life.
Karen Covy: How can people ensure they are no longer linked on credit cards or debts post-divorce?
Sue Plisch: Truly joint credit cards are actually rare. Usually, there is a primary cardholder and an authorized user. The primary cardholder holds the rights and responsibilities, while the authorized user just uses the card.
If you are the primary cardholder, you can simply remove your spouse as an authorized user. Everyone needs at least one credit card in their own name. If you're only an authorized user on joint cards, you could wake up one morning and find all your credit cards canceled.
Karen Covy: If you're an authorized user and the primary holder misses a payment, does that affect your credit score?
Sue Plisch: You should call the lender to see if you can remove yourself from the account and disassociate from it as much as possible.
Karen Covy: What should someone do if they wake up to find their credit cards canceled because they were only an authorized user?
Sue Plisch: If you're thinking about divorce before having the conversation with your spouse, look at your accounts. If you don't have a sole bank account or a credit card where you are the primary user, open them right away as a first step.
You can set up an online bank account with electronic statements so nothing arrives in the mail. While still married, you can apply for credit cards using your joint household income to secure a higher credit limit. You shouldn't run up unnecessary bills, but it gives you flexibility.
Karen Covy: Beyond opening separate bank accounts and credit cards, what else should someone do financially during the planning stage?
Sue Plisch: Start tracking your expenses. When facing my own divorce as a former stay-at-home parent, I was panicked about what to do. What gave me peace of mind was finding a budgeting app to track our spending on utilities, groceries, and kids' extracurriculars.
When we eventually separated, I had a clear idea of what it actually cost to live, pay for the home, and support the kids. Finding the right app takes some trial and error, but knowing your numbers brings a sense of freedom.
Karen Covy: What if someone's spouse controls all the money and hides the bills? How do they get those numbers?
Sue Plisch: Not having equal access to financial information crosses into financial abuse territory. In a healthy marriage, both spouses have equal access.
If you lack access, look at your tax returns. You can request a copy of your tax transcript at IRS.gov. A financial professional can interpret it and reveal a goldmine of information about your financial situation. You can also pull a free annual credit report at AnnualCreditReport.com to see all loans and credit accounts in your name.
Karen Covy: Does requesting a tax transcript from the IRS trigger an audit?
Sue Plisch: Not at all. Anyone is entitled to their tax transcript. I always ask new clients for three years of past tax returns because they reveal so much, including undisclosed businesses or accounts.
Karen Covy: What other documents or information should people collect?
Sue Plisch: Early in mediation or litigation, you'll complete a financial affidavit listing everything you own and owe. Gather recent statements for all bank accounts, investment accounts, retirement accounts, real estate, collectibles, and debts.
If you lack access, pay attention to incoming mail. Even taking a picture of an envelope can reveal financial custodians like Fidelity, Schwab, or Chase. With the right attorney, subpoenas can get the records, but knowing where to look saves time and money.
Karen Covy: What if they can't get actual utility bills?
Sue Plisch: If you want to keep the house, call the utility company directly for historical costs, or ask a neighbor what they spend on utilities to get a ballpark figure for future projections.
Karen Covy: Do you have any other stories of financial pitfalls you've helped clients avoid?
Sue Plisch: I worked with a stay-at-home mother whose husband was a very high earner and very controlling. Whenever he got angry, he would threaten to stop putting money in the account.
During negotiations, she wanted him to pay half of every individual expense—cell phones, kids' car insurance, utilities, and extracurriculars. I suggested a different approach: Calculate the total cost, request enough overall spousal and child support to cover it, and offer to pay all those bills herself.
By covering the bills directly, she eliminated the need for constant communication and prevented him from using bill payments as a leverage tool against her or the kids.
Karen Covy: That sounds empowering, though it can be a trade-off if costs rise.
Sue Plisch: For someone leaving a high-control dynamic, gaining independence and avoiding constant negotiation with an ex is well worth it.
Karen Covy: Sue, this conversation has been incredibly helpful! Where can listeners find you if they want to work with you?
Sue Plisch: They can visit my website at ResilientDivorceSolutions.com and click the button for a complimentary 30-minute consultation. Even if I'm not the right fit, I always try to point people in the right direction.
Karen Covy: Can you work with clients outside of Illinois?
Sue Plisch: Yes, as a Certified Divorce Financial Analyst (CDFA), I can work with clients across all 50 states.
Karen Covy: Perfect! Thank you so much for sharing your wisdom, Sue. To our listeners and viewers, if you enjoyed this episode, please give it a thumbs up, subscribe to the podcast, and subscribe on YouTube. We'll see you next time!
