L is for Leverage.

 

“Give me a lever long enough and a place to stand, and I can move the earth”…

Archimedes (287 b.c. – 212 b.c.)

 

Leveraging is something that we do on a daily basis throughout our lives. There are different meanings to the word leverage but the concept – whether in our finances or divorce – are similar and can be a powerful tool.

The principle of leverage allows you to use less force but potentially receive greater rewards. However, if you use too much force, the leverage can cause you problems.

The best example of leverage is a seesaw in balance. If you put too much weight on one side then it will fall and be out of whack. This is true with your finances. Financial leverage refers to the amount that has been borrowed compared to cash invested. Buying a house in California in the mid 1990s was an example of leverage on the positive. The less money you put in and the more you borrowed meant that you multiplied your investment (equity) and increased returns. However, when real estate began collapsing whatever equity you had in your home quickly became worthless.

Leverage is a tool that is also important to look at when you are divorcing your spouse. You need to ask yourself how you can leverage all of the knowledge and resources to your benefit. When using leverage in divorce it allows you to have more power in negotiating your settlement. Always do your homework and know your bottom line as to what terms are acceptable to you. Look at the pros and cons and think about what can go wrong. Leverage yourself to reach the best outcome without putting you and your family out of balance.

Answers from AZ

About Ann Zuraw

Ann Zuraw, the voice behind "Chicks, Chat and Change", is a Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), and Certified Divorce Financial Analyst (CDFA™).If you have comments on this post contact Ann Zuraw

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