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Doctor Dividend
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Just a working class guy figuring out how to live off my retirement funds now.
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  • How To Be A DGI Investor And GUARANTEE You Will Lose Half Your Money

    Let me start off saying this is not a strategy I recommend to anyone. In fact, I never saw it coming. Well, not entirely true. I was unhappy for a while, but just never admitted to myself to do anything about it. In fact, the best story I heard was this:

    "From a business perspective, it is the worst investment you can ever do. At best, you break even. At worst, you will lose half your money."

    The business I am talking about is marriage, or more specifically, divorce.

    If you have read some of my articles, you will understand this article is designed to be tongue-in-cheek. A sarcastic, but now new reality for me, about investing, investing through divorce, and what will happen on the other side once I am single again. This is still new and raw from an emotional perspective, but since this is a financial site, I am trying to understand the financial ramifications of a divorce. This was written from two time periods - one at the beginning when I just needed to write down what were going to be the big financial issues and secondly, what the results were without delving TOO much into specifics. It will be difficult to comprehend until it is all over. I am not writing this from a pity perspective, but around the questions:

    "What Now? What am I allowed to do financially once a divorce is in process?"

    "What happens to my own financial projections and my investing style once the divorce is final and I am now a single person investing for my future?"

    (Note: Every state is different in how the procedure of divorce works. I am not an attorney and can only draw on my current personal affairs to write this article).

    -Your financial life becomes frozen. What do I mean by this? According to the filings, you cannot do any trading of stocks, buying or selling. If the country's debt ceiling becomes a worrisome issue again and the market drops 15% in 2 weeks, too bad. You can't capitalize on the opportunity.

    -Your assets are still joint until they are not. Our money is still intermingled. Since we only use one savings and checking account to deposit our paychecks, we continue to do that. I thought it would be smarter if we started separate accounts for any salary moving forward to say "Yours is yours and mine is mine and what we had together stays there to pay the bills," but even if you begin to separate accounts, it is still part of the joint assets when things finally get divided. So it would create an extra step if we did it now versus later.

    -You can't deviate from your spending pattern. I keep a big picture idea of how much we spend per month for the last two years. If I see it jumped an extra 20% moving forward and I haven't changed my spending habits, then that would come back to ding her. Right before my friend's divorce finalized, his now ex-wife bought $6000 of furniture just to twist the knife a little more because all the furniture was for the children and he had to eat it.

    -You cannot change beneficiaries on your accounts. You are spiteful, you are hurt emotionally and you don't want this other person to get anything you have amassed. Well, you better hope you don't die either until it is final because he/she is still most likely the primary beneficiary on your accounts. As soon as the divorce becomes official is when you can redesignate who will be your inheritors.

    There are going to be big issues when it comes to splitting whatever assets you have, or sometimes, more importantly, whatever debts you may have. Obviously, everyone's situation will be different. I am going to use my personal situation to show how 5 issues specific to us were putting a massive strain on settling our divorce. Answers to what did happen are put in parentheses after each question.

    1) Can we use one lawyer? Some people have been very lucky, it is an easy split, they use one lawyer for the paperwork and it ends up costing around $2,000-$3,000. As much as we would rather keep the money in our pockets and not in the lawyer's, this was not feasible in my situation even if we wanted to be collaborative (out of the courts and litigation). My last point will explain why. (Note: We ended up not going the collaborative route, used two lawyers, but remained out of an actual court setting)

    2) The value of the house. This should be simple enough. Get a realtor to come over and say how much can you put this on the market for? (We did end up selling the house as neither one wanted it for our future lives. The price to sell became a big issue not from my side, but from my ex and the realtor trying to convince her to sell it quickly.)

    3) Child support. We have agreed on joint custody but my ex-wife will have primary conservatorship (she has greater time of possession with the kids). I will owe child support, which I am fine with. What is interesting in our state is the archaic idea of not looking at my spouse's income to see how she can handle things financially. Her income has ZERO basis on what I have to pay her, even if she made more than I did. (She does not but she makes a very nice salary on her own.) Based on a crude equation, there is a maximum child support per month I pay to cover "food, shelter, and clothing." So, from what I can gather, that per month does not take into account: Day care, after school programs, summer camp, field trips, medical insurance, etc. and the appropriate split of how much each of us would pay above and beyond child support. There is no tax credit/deductions for child support (Note: I estimate approximately 15-20% of my pre-tax salary will be going towards my children.)

    4) Stock bought prior to the marriage. If you have read some other comments, my ex-wife worked for a public corporation. They had an employee stock program. She accumulated some shares via the stock program six weeks before we got married. After 3-4 years, the stock tripled. Looking at the overall weight of our portfolio, I brought it to her attention and said if we sell about 1/3 of the shares, our cost is now "zero" and we still have the other 2/3 of the shares to let it ride. She was never hands on about any investing decision and went with my recommendation. I MAXIMIZED the profit and sold the first shares she accumulated, never thinking six years later we would be in this mess. From the point of sale until now, the stock has more than doubled again and still remains an excellent stock and is again 20% of the total value of the portfolio prior to the divorce. The question becomes, does she deserve to have those original shares as her possession and then split after that or whatever she has left is hers and then split? (I ended up settling that even though we sold those costs basis of shares, she still got those first shares as if they were before the marriage and then split the assets. I was already willing to concede more going in so this came out to my advantage, if you have to keep track if someone won or lost, and frankly, everyone loses in this.)

    5) The value of the business. This is THE can of worms and was making things hostile for a spell. I am a healthcare practitioner. There are the 4 walls and the equipment (the actual assets and the loans with it), but there is my personal goodwill that makes patients come back to the office. If I were to sell my practice to another physician, included in that price is my personal goodwill. HOWEVER, for business appraisals in my state for divorce purposes, the goodwill is excluded because it is solely attached to me, which lowers the value of the business by a lot. There are numerous examples of case law that support this but she is pissed. Her argument being that she stopped her career due to my prior military service and for the first few lean years out in civilian life when I was not making the income I make now and should hope to continue to make moving forward, her income supported us. Though I don't dispute any of this, my feeling is you go by how it's done in this state and whatever the value is, that is what we go with. If the shoe was on the other foot, I would be saying the exact same things my ex-wife is saying now but succumb to the fact that if that is how it's done, then that is how it's done. The sad thing may be that she may want to litigate this and she will still lose and now the lawyers make out. (Note: She did succumb to the fact that this is how the state does it and did not move forward to try and change the law, which she would lose anyway.)

    So how much economic damage will this be? On a legal side, I have heard numbers as cheap as $2,000 and as much as $100,000+, if you get into litigation. Our divorce ended up costing between $15,000 and $40,000 (keeping this range wide for obvious reasons) total because of the number of professionals needed to setlle our issues - two attorneys, a mediator, and a business evaluator.

    What about the other big economic issues? Again, exclusive of the emotional damage this has created, the three economic questions are: 1) How much child support will I be paying?

    2) How much above and beyond child support will I be paying?

    3) What was the split of the total assets?

    Because of my salary, I am paying the maximum in child support, which is fine. The split above and beyond child support was better than I expected. After providing the documentation for what was brought into the marriage and removing those assets from the big pool, the split of overall assets was also better than I was willing to concede.

    But getting back to my original thought: How is this going to change when I can retire? Will this change the way I invest? Do I now feel like I need to take more risk because I have roughly half the assets versus just six months prior?

    To try and predict anything 15-40 years out is a near impossibility, but my best guess is that divorce will delay the retirement by 4-7 years. I always had in my head that I wanted to retire by 53. I felt that was young enough to still be active and travel, but pushing it back to 57-60 years of age will either hurt me mentally or now make me hungrier to work harder to not only catch back up, but amass more than enough to retire earlier. I have less liquid assets because I bought out her half of my practice. Will that make me change my style of investing? No, it won't. I still understand I need cash flow and the purchase of dividend paying stocks is the easiest way for me to do so on a passive level once I do retire from my full time employment.

    So while my financial (and personal) life is now off the pause button, I would love to hear comments about those who have gone through divorce and what to expect from a (mostly) financial perspective only.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: retirement
    Jul 05 7:01 AM | Link | 8 Comments
  • Are My DGI Stocks Jumping Off A Fiscal Cliff?

    The most boring news for DGI stalwarts is when you see a press release that a stock that you own has declared their next quarterly dividend. It's barely worth reading except when it is right around the time they announce their next expected annual dividend increase. But what do you do when within the normal verbatim they specifically add a sentence about your dividends and the Fiscal Cliff?

    That just happened to me with one of my stocks last week, Southside Banchsares (SBSI). The Press Release, as seen here, has several parts:

    1) The quarterly dividend of $.20 per share.

    2) A special dividend of $.13 per share.

    3) The authority to purchase $10 million of common stock

    But here's the kicker, as it is written:

    "In addition, due to the potential changes in the tax code the Board approved a one time only additional cash dividend of $0.20 per share."

    So not only will I get a special dividend of $.13 per share, I get an EXTRA SPECIAL dividend of $.20 per share besides. Why would a company purposely separate it out versus just saying a $.33 per share special dividend? What's the point of referencing the Fiscal Cliff and the tax code? Are there other stocks that have had press releases about their dividend and mentioned the Fiscal Cliff within the release? The real question boils down to this:

    Is SBSI hinting that my dividend stream will be going down?

    I really want to hear other people's take because I am not sure how to interpret the message.

    Disclosure: I am long SBSI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Nov 12 5:45 PM | Link | Comment!
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