Welcome to Divorce Dialogues. I'm Catherine Miller. Divorce Dialogues brings extra guests to the airwaves to talk through your divorce questions and fill in the gray areas about separating. From thinking about divorce, to how to behave during divorce, to what to do after, this is Divorce Dialogues.
Welcome to Divorce Dialogues. I'm Catherine Miller. I'm the founder of the Miller Law Group and director of the Center for Understanding and Conflict. And I am on a mission to change how people divorce and help them divorce with dignity.
And my guest today is Jonathan Satofsky. He is a CEO and Chief Behavioral Coach at Satofsky Asset Management. He provides leadership, coaching, advanced financial planning and oversight, a cross-line relationship in business operations. Jonathan is a creative at heart.
He's always drumming out new ideas and seeking solutions to give his team and clients the greatest probability of sustainable success. Before founding SAM in 2007, Jonathan served over 13 years at American Express Financial Advisors, where he was recognized by the Chairman Advisory Council as one of the youngest top 10 advisors at the company. Jonathan holds a certified financial planner and chartered financial consultant, certified investment management analyst, and certified private wealth advisor designations. Welcome, Jonathan Satofsky.
It's a pleasure to have you on the show. Thank you for having me. Well, that's a long bio with lots of financial credentials. I mean, one of the things that we were talking about being something that would really be a relevant thing for people getting divorced is understanding how divorce affects their taxes and what problems people who are getting divorced might be facing.
And what are the common problems that you see people running into when they're getting divorced or not necessarily paying enough attention to when they're thinking about the divorce process? Well, it's interesting. Generally, and what I've found in over 25 years of being trying to help families with money and a relationship with money, it's not uncommon for one spouse or the other to delegate responsibilities about money and not wanting to be involved. So at the forefront, if you begin to understand the root of the issue when coupling or decoupling, one of the most important things is to have both spouses involved in the accumulation or decumulation of assets throughout the course of the marriage in order to foster a healthy understanding of how things work.
If you come upon a situation where divorce happens and one of the spouses is not informed, the magnitude of trust amplifies because they don't understand. There's a complete lack of education and understanding. So I think it's incumbent upon people at the, it wasn't exactly your question, but it's incumbent upon people at the disco to be educated in how money works, to understand how a balance sheet works, how a cash flow statement works. And, you know, if one spouse is the primary breadwinner, to understand, okay, if something happens, this is traditional financial planning, not just in retirement, but in death or disability, what happens if the family loses that primary income source?
What is the balance sheet and the accumulation of assets? How does that support and sustain the surviving spouse? So in theory, in traditional planning, if you look at something from that angle, the same theoretically can be held in the process of divorce. It's just theoretically half the assets.
Right. I think that makes a lot of sense. And I think what you say is a really nice idea. Right.
That people would be involved. And I think it's a really good idea for people to talk about money before they get married. It's part of what I think of when we work in the prenuptial process. No, it's not just about talking about what's going to happen in the event of death or divorce, but really what's going to happen during the marriage in order to maximize the couple's ability to have that kind of conversation and share that kind of understanding.
And yet, and this is kind of a big but, people don't. And people have different relationships to money. And couples often divide responsibility and understanding of tasks that need to happen, including the task of money. So, I mean, sometimes you have a couple where one spouse is completely involved.
You know, one spouse spends the money and the other one worries, you know, earns it and manages it and deals with the accountant and the financial advisor and the financial planner and all that stuff. But the other one is just sort of responsible for distributing it. And other times you have a relationship where there's more balance. So, if people are coming to a divorce and they have one of those financial visions where one person really doesn't understand what's going on with the money, how do you think that person can bring him or herself up to speed enough to talk about the financial issues in the divorce and have enough understanding so that they can feel reasonably confident that they understand what their financial future holds?
So, as you said, it's unfortunate that this happens and I have to beg and control the spouse to just show up once a year. You know, just to look at a balance sheet, just to try to understand it. And I heard the other day that 2% of people from the world understand math and then there's the other 98% that, you know, it's like Greek and people don't want to think about it at all. So, how do they get to understand it?
Well, it's sort of a phobia when someone has a fear or intimidated by numbers of just throwing their hands up and I just don't understand. So, to combat that, you know, the hope is that they can retain a financial planner or there is a designation, another one of the designations for continued education, a certified financial divorce analyst, you know, a CDFA, a certified financial analyst, where they learn about educating the spouses about what pre- and post-marital assets look like in trying to find a common ground and a mediation so that they can do some financial planning. And if there was a compassionate divorce where each party wanted to be civil and you wanted to communicate, you would say, okay, how do we split the assets to give each person, you know, some security and quality, license and confidence to even so much as create a simple budget? Say, okay, here's the assets that you're going to get and here's the income you're going to get and, you know, you're going to have to live on this.
You know, here, you're going to have X amount of months and, you know, oh, I'll buy a house. Okay, well, let's talk about what you can afford in the house, you know, or rent, you know, post-divorce. And it's much easier sitting down and looking at it unemotionally. As is often said, you know, most people are Einstein brothers and Mr.
Magoo for themselves. Well, it almost seems ludicrous to say taking emotions out of the money because there's so much emotion around money issues in our culture. And money is so much more than a way to pay the bills, right? It's about power.
It's about influence. It's about success. The way we compare ourselves to our families of origin and each other. And there's so much more to it than just financial planning.
And so when you say, Jonathan, it's like, well, let's take the emotion out of the money. You know, listen, I'm a divorce professional. It's hardly ever that the emotion is out of the money. So how do people do that?
How can you separate out our listeners feeling even just when we ask people to do their budgets? We have to do that. Now, budget is a word I happen to hate because it's like the word diet, right? I mean, diet implies restriction, right?
You're not going to eat fat. You're not going to eat sugar. You're not going to eat salt. It's going to be something you're denying yourself.
And I think budget also has that same sort of sense of denial. But sometimes when people are looking at their cost of living, how they distribute the money in order to live the life that they're leading, they also come back to me. And I don't know if you have this experience, too. And they are apologetic.
Oh, I know I shouldn't spend so much money eating out. I shouldn't spend so much money on clothes. We shouldn't spend so much money on vacations. And there's so much sort of self-judgment there.
Anyway, that was a lot I asked you. So what do you think about all of that? Well, I'm with you. I find the most painful part of financial planning budgeting.
You know, I started when I was 22 years old trying to help people. And people would hire me that were doctors, lawyers, hedge fund managers, private equity people, people that were brilliant in their field. You know, a lot of wall street people. You know, it was very interesting.
I was like, why do they hire me? I don't know. I'm going to do it. But just the simple act of creating a balance sheet and a cash flow statement is very revealing because it's like going to a doctor and doing your blood work.
If I go to a doctor and he takes my blood, he says, you have a high cholesterol. He's just giving me the facts. Here it is. So from a planning standpoint, if I take an X-ray once a year of some finances and I look at the budget, like, okay, you make X amount a year or whatever, pick a number, you know, $100,000, $1 million a year, whatever the number is.
And just ballpark. I oversimplified it. If I were to give you a check that you didn't have to pay any taxes, what would you think you would need to be able to not work anymore, to live a life that you would feel financial freedom, you know, the idea of beginning with the end in mind? And so people draw a number, you know, $10,000 a month, $50,000, $100,000, you know, it depends on where the person's coming from.
And I go, okay, fine. It's a starting point. It's not an end-all, be-all. It's fine.
Life happens, and it's almost a certainty that you're not going to be on budget. There's no way, you know, like, you're going to make an excuse every year from my experience that, oh, this year we have this, and this year, I'm not increased. I don't want you to feel free coming to me. I'm just trying to help because everything is rooted off of how can you make decisions if I don't know what you need if I'm beginning with the end of mind, you know, for retirement, for insurance, for accumulation, for risk, you know, you know, these are important factors.
The most important factor is what I need to be able to ideally pay you out of pension or you're creating your own social security for yourself. So once we get a number and we pick a number and pick, you know, again, $10,000, for example, if I sit down with them a year later and we just even go to some simple exercises and say, okay, you have tax on the bank, $10,000, $100,000 a million, the truth theorem is how much you have at the bank at the end of the year and how much you say it's relative to that. Oh, you said you're spending X amounts. I see your income.
I see the taxes. And there's no joke here, but let's just be honest. Let's all say to say it. You're not really spending $100,000.
You know, so if you're spending $200,000 a year or whatever, it's okay. I'm not here to judge you. We just need to calibrate the decision making around what you actually need. And let's just be honest about it.
I want you to be able to maintain the quality of life that you want. I don't want you to be ramen noodles and curl up in the corner and wait to die. I want people to have the greatest quality of life possible. It's a process that takes a long time for trust and joint understanding.
And in divorce, as you pointed out, there's so much emotion, fear, emotion, guilt. You know, you just compound everything times 10. And it becomes so much harder to calm your emotions and get down to rational thinking of this is what it is. This is what you're going to get.
Like, you know, there's really, you have to figure out how you're going to live and design a quality of life that you want on whatever number that you're going to have or the assets that you're going to have. So there's a couple of simple rules of thumb that are helpful here to get people's mind wrapped around designing a life. And the first one, which is one of the largest expenses, housing. I want to remind people that they're listening to Divorce Dialogue.
I'm Catherine Miller. We're here on WVLX 1460 AM, alternate line stage from 5 to 530. And we're also available to the podcast wherever you listen to the podcast. And I'm talking today with Jonathan Satosky about financial planning, taxes, and divorce.
And we were just talking about some of the places where people maybe don't have the world's best judgment. And you were about to talk about housing. So let's hear about that. Well, just understanding simple rules of thumb, which go back to lending.
You know, housing should be about 28 to 33 percent of your income. That's the max. And that number is a rule of thumb. It's not precise.
But generally, that's actually how lenders look at housing and what you can afford in a mortgage. So, you know, if someone has $10,000 a month of income, their housing shouldn't be more than $2,800 to $3,300 a month. And that's important because there's other expenses in life. You don't want to be house rich and cash poor.
And I think, you know, particularly in the North East, the North East housing costs are quite expensive. So that decision is going to help people have breathing room and bandwidth for a lot of other decisions if they can get that one right. And I think a lot of people really, with the house, the home that the family has lived in has a lot of emotional resonance, too. And I think a lot of people try to hold on to it even when it might not be financially wise to do that.
What is your thinking about the balancing of stability for the family versus the cost of housing? Well, it depends on the rest of the balance sheet investment standpoint, as you pointed out, of what's affordable. Because at the end of the day, as is, you know, said when you get on an airplane, you know, the most important thing if you have an emergency is to put your oxygen mask down first before you take care of the person sitting next to you, even if it's your child or your parents. And that's important in the housing because you think you're providing stability.
Oh, I don't want to change the house for the kid, you know, or for the kids. You know, this is very common. That's for emotional reasons when you go through divorce. You know, that's not making a decision for a year because, you know, people aren't generally thinking very rationally.
So maybe you can give it your idea. But thereafter, if you start thinking a little bit more clearly, the reality is if you want to have freedom, financial freedom and independence, historically, housing has not been the best investment over the last 50 years. It generally goes up by inflation. The more these pockets of areas have been hotter than others.
But generally, you know, when people come to a financial planner and they're like, hey, great, I'm 60, 70, I want to retire. And you want to have a balance sheet and have, you know, $5 million in a house and virtually no assets. You're like, well, what are you going to eat? How are you going to have money to eat?
Well, you have to sell the house in order to live. And there's a lot of people that get into that position that are force sellers of their home in order to support their lifestyle. So you want to really look the balance sheet clearly to have an honest conversation about can you sustainably support living in a house or do you need to temporarily maintain a house to get a kid through middle school or high school, a shorter window of time, and then say, okay, after that window, then I'll recalibrate. But it really depends on prioritizing that financial freedom because there's also an opportunity to come up to money, not just the money tied up in the house, but the carrying cost of the house.
And that can be directed towards better use. It's supposed to give this whatever spouse more financial freedom and the child more financial freedom and design a life more imminent to say, you know, let's be more creative and design a life that's sustainable. That is, reducing the stress because stress kills. And if you can create a more harmonious situation, then you can live a happy life and you can recalibrate, you know, and redesign the next chapter that could be more creative than previous where that people are anchored and overweight and housing and stressed out.
Yeah. You know, I'm wondering if you're talking, when you say more creative, what does that mean to you? Because it's in your bio also. So what is the value of being creative with your finances as you see it, Jonathan?
So what do people work for? They might work because they have a passion for a job. And many people work because they need a month. They're not working for pursuit of a passion or pursuit of bliss, unfortunately.
People are like, oh, how am I going to stop this job? You know, when do I get out of this? Well, what do they want to get out of it? People are really, at the end of the day, looking for freedom.
Freedom of time, freedom of money, freedom of relationships, freedom of purpose, freedom to do what they want to do with who they want to do it, where and when they want to do it. And so if you're really thinking creatively, how do you give yourself that creativity? The first thing at the core of it is, do you want to minimize your fixed obligations? If I don't have a massive overhead, you give yourself a lot more freedom.
You don't need to cover such a heavy lifestyle, heavy bills. So people are on vacation right now, right? I'm on vacation at the moment, and I'm traveling, and I could rent a hotel for $1,000 a night or $1,000 a night, you know, depending on the styles in which I'd like to live. And creatively, with Airbnb and, you know, booking.com or kayak, you know, people can travel much more creatively, much more cheaply.
I mean, when I'm putting my head down on a pillow, like I really need to pay for an extraordinarily fancy place to stay, that gives me – that's a short-term sacrifice of saying I'm not going to stay in a five-star hotel in order to give myself more spending money to travel more, to eat better, to really reprioritize and rejigger the values that you have in life that really are meaningful, which, you know, in many cases, you realize that shared experiences are more valuable than stuff. So that's what I mean by creativity, is how you design a life that you can recalibrate the priorities and values that are important to you and your family and or of a way that you can feel like you can design your own financial freedom. And if it means, you know, reducing your overhead with housing, great. So reduce your overhead with housing, you know, live somewhere that is, you know, not so suffocated.
I'm Catherine Miller, and you're listening to Divorce Dialogues here on WBOX 1460 AM every other Wednesday from 5 to 530 and also available at the podcast wherever you listen to podcasts and on the podcast website, divorcedialogues.com. And I'm talking today with Jonathan Satosky about financial planning, taxes, and divorce. And Jonathan, if people are interested in learning more about you, what you do, or your firm, how can they find out more and get in touch? So we do have a social media presence, various social media, LinkedIn, Facebook, Twitter, and the like, YouTube.
It's all rooted from our website, which is at satosky.com. which is S-H-E-O-V-E-S-K-Y.com, and we have an office in New York City on 37th Madison. We do work with a fair amount of divorcees and waivers, which is common practice, and finally in divorce, which has happened a number of times. We end up working with both spouses because we're able to separate it and give themselves another point first and be able to help them navigate.
So it's kind of nice. And we'll reach 1212-584-1900 is the New York City number if anyone needs some counseling. That's great information. So Jonathan, when people are getting divorced and they're thinking about dividing up their property, how do you help people think that through in terms of we talked a little bit about real estate, there might be businesses, there might be appreciated equities, there might be personal property in collections.
How should people be thinking about the best way to do that that's fair to both of them, but also takes into account the value and liquidity of the variety of possibilities? That's an excellent question. Dan, you touched on a couple of things that maybe people gloss over, but liquidity is incredibly important. Depending on which spouse has the earnings capacity going forward, the spouse without earning capacity would need more access to liquid funds to be able to support in the same lifestyle because the other has money coming in.
If you just receive a liquid asset and you have no income, then you become a forced seller. Being a forced seller in any situation is not optimal because you have to be a press taker versus be patient to wait for the optimal time to provide liquidity on assets. So do you want to convert to income or money to be able to support one's lifestyle? So that's a pretty honest thought that people should be mindful of.
Okay, so liquidity and not putting yourself in a position where you have to sell something because you need the money at an optimal time. So that's one thing to think about. And one of that, just circling back to the taxes, you know, when in the old days, when alimony or maintenance, as we call it in New York, was deductible, meaning the spousal support was deductible and the child support wasn't, we had a real opportunity to leverage a difference between tax brackets and maybe create a little bit more cash. But that opportunity has gone away, at least for the time being.
What are some other tax concerns that people should think about? Sometimes I hear them worrying about maybe losing the second exemption on the sale of a primary residence, a capital gains exemption, or, you know, other things like that. Are there some things that you think people should know or watch out for as they think about divorce that they might not otherwise think about? Well, that's a very good point, the exemption on a house.
You know, also, you know, you might receive the house as an asset. The question becomes, what is the cost basis to which you inherited? Because if you do end up having to sell the home, there could be tax consequences above and beyond that exemption. The receipt of assets, you know, knowing that the tax cost assets, retirements or non-retirement assets, that all comes into consideration and looking at what the translation of that turns into in terms of being able to live.
You know, even retirement assets generally aren't drawn until 59 and a half to 70 and a half, 72 now. So that's a consideration for a younger couple getting divorced. If the majority of the assets are tied up in retirement plans, that, you know, they may need more liquid assets and non-qualified assets to be able to cover that gap a ton and forego the retirement assets to the working spouse, for example. So there's, you know, ways to juggle it if there was a conciliatory and a collaborative divorce or a mediation where that, you know, that's what an ideal outcome would be.
So just in our last minute, Jonathan, what do you think is your best advice for somebody who's just thinking about divorce now or just in the beginning? What should they do? I would say that you should try to be a certified divorce financial analyst or a mediator and recognize the incentives of the professionals that you hire and be, you know, when you're dealing with the legal system, it's extraordinarily expensive and contentious and it leads to a lot of distrust and a lot of money going down, a lot of money on emotions being wasted. So if you can find an objective middle party, there is a collaborative process where you can get the attorneys, the forensic accountant, a therapist, and a certified, you know, divorce financial analyst in a room and, you know, save everyone a lot of time, energy money and emotions to try to find no grounds that's fair and reasonable for everybody.
All right. We're going to have to leave it there. Jonathan Satoshi, thank you so much for being our guest. Thank you for having me.