Are you a FIRE couple? Are both of you deeply invested in the “Financial Independence Retire Early” lifestyle? If so, you may think your divorce is too complicated for mediation. Perhaps surprisingly, however, the opposite could be true, even if you have a financially complex situation.
FIRE and Divorce
Typical FIRE couples live below their means and focus on building multiple streams of income to facilitate an early exit from a traditional career path. For some, this means planning for full retirement by their 30’s or 40’s. For others, it means building a passion project as a side hustle, until it brings in enough income to be a viable full-time pursuit.
Regardless of exactly where your lifestyle fits into the FIRE paradigm, divorce is likely to be challenging. The separation process can throw even the most carefully crafted financial plans into chaos. Still, with the help of a good consulting attorney, a financial advisor and a skilled mediator, it will be possible to maintain financial independence and stability during and after divorce.
Avoid High Conflict to Preserve FIRE Goals
If divorce appears to be imminent, remember that the more you can agree on outside the courtroom, the more your life plans can remain intact. Court battles are always expensive and time-consuming. Mediation is generally a much faster and more cost-effective route. It may be especially appropriate for FIRE couples, because the FIRE lifestyle is out of the mainstream. Judges are unlikely to have the time or the patience necessary to assess complicated and unusual financial arrangements. Couples in mediation can negotiate issues without worry that a judge may look askance at the unorthodox nature of their FIRE plans.
Be Sure to Consult with an Attorney
While mediation does not require as much legal help as a litigated divorce, you will need a consulting attorney to protect your individual interests. Your mediator can give you some information about the law, but only an attorney can advocate on your behalf. Navigating the ins-and-outs of equitable distribution and the potential impact of spousal and child support laws can be complicated. It is also critical to have legal help crafting a Marital Settlement Agreement (MSA), especially when it comes to plans for early retirement. New Jersey law considers early retirement to be any time before age 66 or 67, depending on when you were born. Those wishing to retire before this must prove that their plan is reasonable and in good faith. Incorporating a plan into an MSA can avoid a court battle over it later.
Even with attorney assistance, mediation results in lower costs because attorneys do not need to prepare for and appear in court. Participants generally agree to exchange information informally instead of resorting to formal discovery. The more open and honest you can be with each other, the faster, less expensive, and less stressful your divorce is likely to be. If you and your spouse end up unable to resolve one or more issues, you can always go to court for a resolution on those discrete matters.
Consider Using Experts
Because you may have complicated financial issues to sort through, you may need to use experts in your divorce. Sometimes people assume that this means mediation will not work, but this is far from the truth. Experts can present reports for mediation and even appear in person if necessary.
What kind of financial experts do FIRE couples typically need? Here are some examples:
This may be an accountant or financial planner with additional training in resolving common divorce issues. Some have special certifications, such as “Certified Divorce Financial Analyst” (CDFA). You can hire a financial expert individually to help you optimize your post-divorce financial situation. You and your spouse can also hire a joint specialist to evaluate the financial implications of any potential support payments or property distribution plans.
FIRE couples often have unusual physical assets, such as multiple rental properties. Appraisers can provide accurate valuation of real estate, as well as other valuable property, like jewelry, artwork, or collectibles.
Business Valuator or Business Appraiser.
FIRE couples are often entrepreneurial, owning one or more businesses. Sometimes these are unusual businesses, such as income-generating websites or YouTube channels. This can result in numerous financial issues. Is the business separate or marital property? What is the value of the business? What is the value of its income stream for purposes of child or spousal support? Business valuators are usually CPA’s who specialize in analyzing the assets, liabilities, and capital of specific types of companies. The more unusual your business is, the more important it is to have an evaluator with appropriate knowledge and experience.
If either or you have a pension or a life insurance policy, you may need an actuary. Actuaries use long-term data to make economic and demographic assumptions and employ statistical analysis to determine the present cash value of assets like pensions and life insurance.
Employability or Vocational Expert.
If you are in the early phases of the FIRE lifestyle, it is likely that both of you are fully employed and working at your maximum income potential. If, however, one of you is planning to cash in and retire soon, and the other is not in agreement with this plan, you may need an employability expert.
How to Use Experts in Mediation
Deciding on which types of experts you need is just half the battle. You also need to decide whether to use individual or joint experts. Agreeing to use the same experts can save you money, but it is not always the best choice. For example, if an asset has a highly variable or subjective value, it may be worthwhile for each of you to get your own opinion, as experts tend to resolve any question marks in favor of the person who hires them. One very good neutral expert, on the other hand, will generally know how to split the difference. It doesn’t have to be all one way or all the other. You might decide you need just one real estate appraiser but want to hire two separate financial advisors.
Sometimes you can also save on fees by agreeing to have your experts prepare abbreviated reports. Full-scale reports are generally necessary for litigation but may not be for mediation. Most importantly, be sure that whoever you choose has a good reputation and the right kind of experience.
Moving Forward Post-Divorce
As a FIRE couple, you are undoubtedly both financially savvy already. This will be an enormous asset in your post-divorce life. While divorce is often a temporary setback, people with high financial literacy generally possess all the tools required to move on successfully. Mediation can also minimize any setbacks.
Is mediation the best choice for every FIRE couple? Not necessarily. Contact one of our experienced family law mediators for more information! For an initial consultation, use our divorce mediation contact form or call us at (888) 888 1383.