7th January 2019 is badged as ‘National Divorce Day’ which is a bit of a myth. For me, at any time, divorce in a woman’s life is about emotional and professional support. This has prompted me to write about what you must include in the financial discussions.
Here are my thoughts on how to avoid making financial mistakes during divorce and my 6 top tips for what you must include in the financial discussions.
Don’t fall into one of the biggest financial mistakes
Don’t forget pensions in the discussions. Simple.
Previous research from Scottish Widows shows that seven out of ten couples do not discuss their pensions at all prior to divorce.
A pension can be a huge benefit and potentially could be his or her biggest financial asset. Many women who I have met post-divorce didn’t want the hassle of bringing the pension into the equation but this is the biggest financial mistake.
For women, many of us have taken time out of our careers to raise our children. Many stay at home mums will have gaps in their pension contributions as well as state pension entitlement if they have not completed a full 35 years of employment.
Don’t ignore the pension – it might be the most important asset in the relationship.
Under current pension rules if your spouse is or has been in a final salary pension, he or she will now be entitled to get a cash value of this scheme. In many instances this can be up to 30 times their income. So if their income at retirement is £20,000 the pension could be worth £600,000.
So please don’t ignore it.
It could be worth more than your home.
I have written about the benefits of pension in a previous article.
Take care. Talk through these pension numbers with a financial planner. They can be complicated. If your ex has a final salary pension they can often take up to 3 months to produce. You should also get any properties valued as well.
Action: Contact the pension provider and ask them for a transfer value. Use this in your discussions together. You may like to seek advice at this stage from a Financial Planner who can assist you with this. Also don’t forget about your state pension. You may need to factor this into the equation too. Each of you request a state pension forecast on the Gov.uk website. You can’t rely on your ex-spouses state pension now so you will have to think about building up your own.
Other Financial Tips when going through divorce
Let’s cover my 6 top tips for helping you to manage your financial matters in a way that will get you results.
Tip 1 – Give and take
When assessing what you each own, it is not about winning or losing. It is about making sure you get through it with the least amount of stress and a deal with suits both of you.
Start by making a list of everything you each own. Include:
- Assets such as property, cars (you may need to get these valued)
- Pensions (you may need to seek advice from a financial adviser)
- Insurance plans (these will need changing)
Discuss what you may like to keep. For many couples, this can be the hardest thing to do, especially if children are involved. It can also get complicated if the house or other assets are owned by one person.
Martin Lewis, founder Money Saving Expert, suggests that you should ”ignore who’s to blame. Don’t see your ex as the enemy. Don’t try to punish them. Work out what your priorities are – what really counts to you – and be warm to their priorities. As with all negotiations, give, take and good will beat aggression.”
If children are in involved, and you think your spouse is not likely to keep to his or her financial agreement, think about whether you want to accept a lump sum rather than a monthly maintenance payment. This may give you more of a clean break than taking a monthly payment.
”Don’t try and hide your money away in a bid to keep it. If you are caught, any existing court order could be overturned and you could find yourself landed with extra bills. When I worked for a family law firm the forensic accountants, who specialise in tracking down hidden cash and other assets, were always busy!”Karyn Fleeting aka Miss Thrifty
It is likely that you will need to think about the financial impact if something happened to your income or your family if something happened to you. If you will be looking after the children, it is important to make sure that you have life insurance in place so they would be protected if you weren’t around. It would also be a good time to review your own protection needs to make sure you can have income coming in whether you are sick or diagnosed with a more serious illness. The financial implications can be disastrous and it doesn’t need to cost you that much money.
Tip 2 – Self Care
Divorce will trigger huge amounts of financial stress for both parties involved. It is the second most traumatic life event you can experience after the loss of a loved one.
Anna Sofit Founder of Addidi Wealth suggests ”How you separate will leave a lasting mark on you and your family. My advice to anyone going through a divorce process would be to aim for a draw rather than a winning, and be more nice than nasty. In the long run it’s better for your soul and mental health knowing you played fair.”
If you have shared friendship groups who are stirring up trouble, ditch the friends who are creating a negative environment around you. This will not help your own emotional wellbeing.
Make time for Self-care. It is the smallest things that can often make the biggest difference. Pick one task to complete. A simple task like ironing 5 t-shirts or planning your meals for a week. When you are experiencing trauma in your life, don’t be hard on yourself. Sometimes getting out of bed will be hard. So set yourself small goals and recognise the sense of achievement.
Evenings and weekends can be some of the loneliest times during separation or divorce. Use this time to plan ahead and give yourself something to look forward to. A new haircut, a little trip away, a night out with the girls. Volunteer, start a hobby or find time for reflective interests like writing. Journalling can be really helpful to document your emotions during this period of grief.
Tip 3 – Learn how to budget
Separation often means your household income will reduce dramatically, so you may be struggling to manage your household bills. This can be daunting especially if you have not been the one in charge of this before.
”The first step is to separate your finances as soon as possible” suggests debt expert Sara Williams at Debt Camel.
Build yourself a divorce survival kit. Learn how to manage your budget. Creating a budget is the first step towards taking control of your finances and getting your situation back on track.
The best tip I can give you around this subject would be to get really good at knowing what you spend and what you have coming in. Keep a track of it on a daily or weekly basis for a month. Use a notebook or download your bank and credit card statements to assess where you are overspending or where you could save some money.
A financial coach would be able to help you do this if you find this a little too overwhelming. It can make all the difference to know your numbers.
Speak with your bill providers – they may be able to help you renegotiate your payments.
Consider switching your gas and electricity supplier. Now is the best time.
If you have a joint account, Sarah Pennells, Founder of Savvy Woman suggests to ”keep an eye on joint account, especially if the split is not amicable.”
Tip 4 – Understand what benefits you are entitled to
If you need to understand what benefits you are entitled to, check out this link on The Money Advice Service website.
You can get Child Benefit if you’re responsible for a child aged under 16 or up to age 20 if they are still in full time education.
Universal Credit has replaced many of the old benefits such as income support and child tax credit. If you have more than 3 children you may still be able to claim some of the old benefits such as Child Tax Credit, so it is worth investigating this.
You can contact the Universal Credit helpline free on:
Telephone: 0800 328 9344
Textphone: 0800 328 1344
Alternatively go and visit your local Citizens advice bureau who will offer you a confidential place for you to discuss your situation and give you some advice on your entitlement.
You may qualify for a single person’s discount on your Council Tax bill and you get help towards it if you are getting some benefits, such as Universal Credit. You will need to apply to your local council tax office to receive the discount.
Tip 5 – Don’t make big financial decisions
Rushing off to buy a new car or a new house may not be the best decision for you to be making at a time when emotion is still high.
I would always recommend that you give yourself at least 12 months after a divorce before making any big purchases. I know from personal experience that making decisions when driven by emotion can lead to disastrous financial consequences.
Don’t let the emotions of your divorce drive your financial purchases.
The temptation will be to go and treat yourself and spend money because you deserve it. Of course you do deserve some treats and happiness but just think about whether you can afford this and whether it is a short term decision for short term happiness and would the money be better off saved.
Tip: It is difficult to make financial decisions when your head is in a mist of fog, with emotions running high. Speak with a close friend who you trust or a financial coach who can help you to make some decisions.
Tip 6 – Seek support from the right people – emotional and practical
Get emotional support from friends and family but get practical support from professionals.
It is really important to seek support during this time. It is often best to use a professional for the financial support as they will be able to give you the practical considerations without any friendship or close bond interfering. Don’t expect emotional support from your solicitor or family lawyer.
Sarah Pennells, Award-winning journalist and founder of Savvy Woman suggests ”talking to a solicitor who is a member of Resolution or Family Law Association in Scotland. You can pay for a one-off advice session even if you decide to do the rest yourself.”
So separate the emotional and practical support.
I work with one family lawyer Stacey St Clair from Hawkins Family Law in Stony Stratford, who have a counsellor in their practice as they understand that they are not the experts to be supporting their clients emotionally through divorce.
Don’t necessarily think that all family solicitors will want it to go to court. Many of them look for ways to avoid this.
Holly Mackay, Founder of Boring Money suggests to ”try and keep it like a business transaction and away from the courts as much as possible. Your day in court will not make you right or prove you are the better person. It will just pay for your barrister’s next skiing holiday.”
If debt is an issue, get help from a debt charity such as StepChange.
Faith Archer, personal finance journalist also agrees saying that ”you could cut costs considerably using mediation, where you sit round a table with a single lawyer.”
If you don’t have any joint debts you can get a ‘notice of disassociation’ to remove any financial link with your ex-partner on your credit file. You will need to contact one of the credit reference agencies who can remove this link.
Take some time to speak with a financial planner who can help you explore your options and help you map out a plan to make sure that you will be ok. Not having a new financial plan could be one of the biggest mistakes you make as this will give you peace of mind and control.
There is hope – you can flourish
Research from London’s Kingston University shows that Women become much more happy and satisfied with their lives after their divorces come through.
“In the study we took into account the fact that divorce can sometimes have a negative financial impact on women, but despite that it still makes them much happier than men,” Professor Yannis Georgellis, Director of the Centre for Research in Employment, Skills and Society (CRESS) at Kingston Business School, said. “One possible explanation could be that women who enter into an unhappy marriage feel much more liberated after divorce than their male counterparts.”
There is light at the end of the tunnel and although this may feel like one of the worst times of your life (and it probably will be), you will get through this. Remember to acknowledge that there is a grief cycle associated with divorce. It will take time to heal and flourish.
“Divorce isn’t such a tragedy. A tragedy’s staying in a unhappy marriage, teaching your children the wrong things about love. Nobody ever died of divorce.”Jennifer Weiner
Look out for my Podcast interview ‘Divorce became my superpower’ with guest expert Caroline Strawson, Accredited Divorce and Positive Psychology Coach and Amazon Best Seller, which will be released on iTunes this week for the launch of our brand new Podcast, ‘In Her Financial Shoes.’
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