The paparazzi-pursued loco parental units of reality TV, the Gosselins, set an example, say money experts — of what NOT to do financially.
Welcome to the wild world of Jon and Kate Gosselin. The “Jon & Kate Plus Eight” reality show duo, originally filmed for their unusually large number of children (a set each of twins and sextuplets), are now infamous for their public break-up and money disputes. Thankfully, there is financial insight to glean from their drama: what not to do.
1. Don’t blow a windfall
The Gosselins earned an estimated $2.25 milllion from their TLC network TV program, not counting proceeds from book sales, appearances and endorsements. However, like so many instant millionaires, they (Jon, perhaps, in particular) may be mismanaging their wealth. After announcing their divorce plans, he went on a spending spree; allegedly dropping $950 on a pair of shoes, leasing a $5,000 per month Manhattan apartment, buying luxury cars and taking lavish vacations. Yet with eight kids to support, necessisities can exhaust even a large net worth.
If you’re lucky enough to come into prosperity or get a job that pays far above the norm, continue to spend sensibly. Rather than take a perpetual paycheck for granted, assume your past earnings will need to stretch deep into the future. Heed this advice more during separation, as overspending accusations can become fodder for costly legal battles.
2. Don’t take your eyes off the cards
Kate was recently witnessed trying to pay for gas with a credit card, which was declined in front of frenzied paparazzi. What happened? Presuming it was a joint account, someone likely forgot to pay the bill, the balance was at or over the limit or the credit line was suspended. Another possibility, says Andy Jolls, founder of The VideoCreditScore.com, is if she and Jon were charging at multiple service stations in quick succession, the creditor suspected something was wrong, triggered a fraud alert and froze the card.
Whether or not you’re in the limelight, having plastic returned in this way can leave you red-faced and in a bind. Especially if you’re a joint cardholder, check the balance, payment history, and account status before charging.
3. Don’t overlook your budget
Minding money affairs must be rough with a television show, media appearances, affairs, and a brood of small children. Undoubtedly the Gosselins live convoluted lives, but throughout all this, they also needed to carefully and regularly supervise their budget. Their personal chaos interrupted this crucial task: Kate claimed she has just $1,000 in cash and can’t pay the bills.
Know how much you need for everyday expenses and plan for them. Disregard the basics at your peril, says Rob Jupille, president of RTJ Financial Management out of Santa Monica, Calif. “A short time of ignoring can result in long-term problems. We see credit card balances go up, missed payments, and increased interest rates. One late deposit can result in many bounced checks.”
4. Don’t be dishonest about money
Sadly, this couple is also grappling with trust: Kate accuses Jon of secretly siphoning protected funds; he says she hasn’t been forthright about the revenue from her book sales.
If you suspect shadiness, address it one-on-one or get counseling. If you’re tempted to sneak, that, too, is cause for pause. “Wanting to hide money before the divorce creates a situation that will cost your family more money and stress, which is not in the best interest of the kids,” says Alexis Martin Neely, lawyer and CEO of the Family Wealth Planning Institute. She recommends writing down all personal economic activity, from accounts to assets. While such a detailed, candid record can improve a marriage, it can also pave the way for a smoother divorce.
5. Don’t overcomplicate personal finances
Jon claims he and Kate have 11 bank accounts — an astonishing number. Why so many? Jupille speculates that the Gosselins are like many people wanting to compartmentalize their finances, holding one for a vacation fund, another for house improvements and so on. This approach can give a false sense of security, though, because it’s so easy to lose track. As for Jon and Kate, “it’s likely because they don’t have someone guiding them better,” says Jupille.
Streamline your financial affairs. “Life is complicated enough,” says Jupille, “without having to monitor so many accounts.” He advises consolidating accounts, having one joint checking account for household expenses, and a single individual account per person.
6. Don’t totally merge funds
The Gosselins are in the midst of separating entwined assets, but dividing them equitably is proving difficult. Further, Kate appears to have been a bit more enterprising, says Jacqueline Harounian, partner in a Long Island, N.Y., family law firm that specializes in matrimonial law, which can muddle a harmonious split. Disputes over who deserves a bigger slice of the pie ensue.
It is not surprising for people to grab whatever they can …
|— Jacqueline Harounian|
Assets and liabilities acquired during the course of the marriage are typically halved. Still, it’s possible to protect some money, says Harounian. “Don’t commingle prior funds, inheritances and gifts. Keep them in their own name. It has the effect of a prenup.” Proper title documentation from the beginning also helps with clarity and argument reduction.
7. Don’t involve attorneys too early
Jon and Kate are indisputably paying big bucks to their lawyers. Even if they want to simplify, custody of their children, child and spousal support, and large sums of money at stake will translate into enormous legal bills. Most lawyers’ fees begin at $250 per hour and go up from there.
Divorce on your horizon? Attempt to work out a reasonable arrangement before hiring an attorney. Each hour you do will save hundreds of dollars. Then, choose counsel carefully. Neely says most lawyers are trained to escalate divergence: “Get a lawyer who is trained to avoid conflict. Find someone who practices collaborative law and beware someone who says, ‘Look out for number one,’ instead of creating a win-win situation.”
8. Don’t break the law
Yet another sordid matter the Gosselins are embroiled in may be lawbreaking. Jon was ordered to return $180,000, the majority of what he withdrew from a joint account. According to Harounian, in most divorce cases there is usually an order that marital assets cannot be transferred or withdrawn without mutual approval. “He may have violated the restraining order,” says Harounian, “and stepped over the line.”
Always proceed legally. “Any transfer of an asset can be looked upon with suspicion and may lead to a claim of misconduct or be subject to scrutiny,” warns Harounian. Document all expenses and demonstrate that joint funds are being used for legitimate family expenses, such as child care, repairs for the home or medical expenses. “It is not surprising for people to grab whatever they can, but there may be an adjustment later, with inventories and appraisals.” Follow the rules and assets that should be allocated to the children can be spared.
So what have we learned from this couple? Surely not that love can spoil or that embarrassing personal details are best kept private, but that handling money well and honorably is essential when a marriage is thriving — and when it’s not.