If there is one thing that everybody experiencing divorce worries about, it is money!
Life changes dramatically for most of us after divorce, lifestyles have to adapt and our approach to finances needs to be reviewed.
Here are a few thoughts to consider:
Assets
During your marriage, you will have acquired assets as a couple. Typically, this is the family home but can also include investments, pensions, savings, businesses, etc. Anything that has value is considered an asset.
Those assets have to be divided fairly and in a long-term marriage, the starting point for an equitable split is 50/50.
Cases can be made that certain assets were acquired before the marriage and should therefore be ringfenced or that one person needs a larger share of the asset pot due to future commitments or earning capacity etc but if you can start at 50/50 then you are in the right ballpark.
Your legal team will advise you on what share you can expect to receive and why.
Income
You will have less income. Two salaries may become one or maybe you are not working and previously relied on your spouse's income. It is extremely rare that your household income will remain intact.
So, you need to think about what income you need and how it will be generated. Will it come from spousal or child maintenance? Do you have assets that can be liquidated to finance your outgoings? Will you earn enough from an existing or new salary? Will you be entitled to any benefits?
Having a clear and realistic idea of your new income will help you plan your future and give you peace of mind.
Outgoings
These too will need to change.
It's crucial to have a solid idea of your monthly and annual outgoings. You then need to look at these and see what you no longer need. Maybe that Sky subscription was primarily for your partner's sports passion and is no longer essential? Could you manage the house cleaning yourself or extend the time between cleans? There will no doubt be lots of items that you can remove or reduce.
That will all help but you may also need to look at your bigger ticket items. Can you afford to live in the house you currently occupy? Or, will moving to a more affordable option take the pressure off and provide a fresh start? Maybe the annual ski trip will become every other year?
These decisions can be difficult and feel unfair and painful but it may help to think of them as temporary adjustments or necessary so that you can move into your new positive life.
Legal Fees
These are often a necessary part of the divorce process. You will of course, do your best to minimise the legal bill and there are numerous things you can do to manage the cost but for most, there will be some level of legal bill.
Try to frame this in your mind as an investment in your future. Your legal team are highly qualified and experienced individuals who are there to represent your best interests, They will obtain the very best outcome for you which may not happen if you do not make the financial investment.
Pension
Pensions are often an emotive subject within divorce. If you have similar pension pots then great but it is not uncommon for one partner to have significantly more than the other. The pensions will form part of the asset pot as described above and will be split equitably when the whole picture is considered.
Looking at your pension pot post-divorce is of course important. You can no longer rely on another person for your retirement income either wholly or in part. So, take some good financial advice early on and see what you need to do in order to protect yourself when you retire. This clearly becomes more urgent the older you are.
Mortgage
Will you need a new mortgage? Do your finances support the amount that you need to borrow in order to house yourself and your family?
This discussion will form part of the divorce process and it is really important to understand how it will work for you.
Getting independent financial advice during your divorce process is crucial.
There are an increasing number of financial advisors who specialise in this area and in particular, can support the less financially savvy spouse and ensure they have the right information and knowledge.
School Fees
If you have children at an independent school, fees can be a huge worry as you separate and divorce.
Clearly, you have to decide if continuing to pay fees is an option but it is often the period before this decision is made, that is stressful and upsetting.
If at all possible, make sure that the school knows what is happening. Many schools are adept at dealing with this situation and will often offer flexibility to support you through the unknowns of the divorce process.
Benefits
You may be entitled to state benefits to support your income.
The most common is child benefit which is available for low earning spouses.
Any maintenance payments do not class as income. and so, do not diminish your right to this benefit.
Review the government website to find out more.
Tax
There are some tax implications surrounding divorce that are important to understand.
This is particularly the case if you are dividing assets and there is a significant period of delay between separation and divorce.
Make sure you understand the implications; your solicitor will be able to explain this in relation to your unique situation.
Child maintenance
If child maintenance is payable by one spouse to the other, it must be paid.
The CMS or a court order will have detailed the amount required. This amount should not be withheld or used as a bargaining chip in any discussions.
Understanding that this money is for your children is essential and will save you future angst and confrontation.
Every divorce case is unique and has different financial factors. Most important though is be to be informed, as ignoring the finances is certainly a recipe for disaster. Conversely, taking control of your financial future is empowering and will ensure that your new life is a positive one.
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