Canadian Public Blog

Discovering Your Financial Reality

Publish Date: 07/06/2018

By Fadi Baradihi, MBA, CFP®, ChFC®, CLU, CDFA®

When contemplating divorce, most people put themselves under undue stress worrying about their financial well-being. Much of that stress is due to the fear of the unknown. So what do you do about it? Before, during, or after a divorce, it is important to keep yourself in reality as to your financial situation. Doing so will give you a sense of control over your life, which will reduce your stress level. Your financial situation can be broken into four different categories: assets, liabilities, income, and expenses. The following are some tips on how to effectively do that.


Assets have a way of disappearing after divorce proceedings start. As soon as divorce becomes a possibility, start by listing what assets you think the two of you own. That list would include:

  • Cash. Do you keep any at home or in a safety deposit box?
  • Chequing accounts. The list would include personal, joint, business, or trust accounts.
  • Savings or money-market accounts. Don’t forget accounts set up for a “special purpose” such as holiday or annual or semiannual expenses. Those accounts are usually funded by payroll deduction and are set up to fund large and infrequent expenses such as the annual premium on the home or auto insurance, holidays, vacations, and so on. Those accounts are easy to forget.
  • Retirement accounts. These include RRSPs, defined contribution plans and pension plans (government and private). Don’t forget any plans from previous employers that were left behind.
  • Non-retirement investment accounts. These include mutual funds, brokerage accounts, annuities, cash-value life insurance, certificates of deposit, and stocks or bonds held in certificate form.
  • Real estate. This usually consists of the house and any other property owned by the couple.
  • Employer-funded incentive programs. These could include stock-option programs, country club initiation fees, and banked vacation and sick days.

Once you have your completed list, start collecting statements for every item that you have listed. Investment companies send statements monthly or quarterly, depending on the type of account, the level of trading activity, and the company’s policy. Most employer-sponsored plans send out a year-end statement in the first quarter of the following year. So don’t panic if a statement that you’re looking for doesn’t show up at the end of the first month after you start the process. If you have a safety deposit box and you don’t have a list of its contents, visit the bank and make a list. Lastly, make a copy of the most recent mortgage closing paperwork. In order to qualify for a mortgage, you would have to disclose all of your assets, liabilities, and sources of income.


Liabilities, unlike assets, have a way of appearing when a divorce is pending. Other than listing liabilities, keep track of excessive increases in debt levels. If you see this happening, notify your lawyer immediately. As a general rule, any debt associated with an asset should travel with it. For example, whomever keeps the car should keep the car loan as well. If there’s a business involved, always question any debts to relatives, friends, employees, and especially the owner spouse. If you detect such a loan, ask for a signed loan agreement, what the purpose of the loan is, and the payment plan.


The next step is to identify the sources of income. Income includes revenue from full- and part-time employment, investment returns, and self-employment income. Add up all of the income from all sources to come up with total income.

Your and your spouse’s income levels are a factor in calculating child support and the proportionate sharing of special and extraordinary expenses, as well as determining entitlement, amount and duration of spousal support, if any. Beware of close-relationship employers. I had a client who didn’t understand why her husband’s income was cut in half after he filed for divorce. After all, he worked for his brother’s construction company.


The next step is to figure out your current budget and your post-divorce budget. Remember that the same amount of income supporting one household will need to support two.

The first step is to gather the necessary documentation that you would need in order to be objective. You should review your banking and credit card statements. As you list your expenses, make sure you don’t “double dip.” For example, if your cell phone bill is directly charged to your credit card, don’t count your cell phone bill and the credit card payment. An area that most people miss is cash withdrawals using ATM cards. You should be able to account for where that money was spent. When working on a budget, a good rule of thumb is to have a number in each category and have a trusted and objective friend criticize your inputs. Start with the pre-divorce scenario using the one-page Expense Worksheet as a guide.

Using two copies of the Worksheet, fill in pre-divorce expenses and post-divorce expenses. Go to the post-divorce chart and carry over each expense with an increase or decrease in its value. For example, an increase would be lawn care, if you would need to hire it out. Food, on the other hand, would decrease.

Now you’re ready for your lawyer. You have a list of your assets, income, and expenses.