5 Reasons why you need to understand your finances on divorce
The thought of getting to grips with your finances now you are divorcing maybe filling you with dread. Perhaps you like me, are one of those people who just don’t like numbers! However, in this post, I’ll share with you 5 reasons why you need to understand your finances on divorce. Having a vague idea, or thinking it’s not that important could lead you to an unfair or unsuitable settlement. The circumstances in which you can ask a court to revisit your financial settlement are limited and expensive. If you start from the proposition but you need to get it right first time, you’ll save yourself a lot of heartache, time and money.
‘Have you and your husband started negotiating round the breakfast table ‘guesstimating’ the value of your assets and liabilities? If so, you’re not alone. I speak to many women just like you, women who want to feel certainty and so want to make decisions quickly. Together with their husband, they begin negotiating without knowing their numbers!
1. Negotiations lack reality
If you own your family home, when was the last time it was valued? If you hold one or more pensions, when did you last receive a Pension Statement? Do you know how much is in your Saving Accounts, ISA’s or the current value of your Share Portfolio? Do you have antiques or artwork of significance – when were these items at last valued? You see, without understanding the current value of these items, your negotiations lack reality. Now, you may feel that guesstimating gives you some ‘rough’ idea to allow you to start making some plans. You may be right, but there’s also the possibility that either one of you may become fixated on those numbers, causing disappointment and distress if they turn out to be unrealistic. You can’t have a share in what isn’t there.
2. You need to understand your spending
You need to understand your spending so that you know what you need going forward, this helps you with realistic negotiations. Household bills, household maintenance, children school fees, clothes, dinner money, school trips, holidays, haircuts, gym membership and your beauty salon expenses all need to be considered, as well as your groceries and car maintenance costs.
Without understanding your spending, you’re negotiating in a vacuum which is meaningless. Understanding your spending also gives you an opportunity to take stock of your lifestyle and look at what is really important to you. You may be fortunate enough to be able to enjoy a similar standard of living once divorced – however, most people have to accept at the change of lifestyle is inevitable.
3. You need to plan for your future
Before you get into negotiating with your husband, you need to have a plan for your future. The future should consist of both short-term and long-term plans. Tempting though it maybe to merely think of the immediate future, this can be a costly mistake.
Case law has shown us at your husband will not be expected to support you financially forever. If you are currently a stay at home mother, you may be expected to find either part-time or full-time work by the time the youngest child is in Year Seven. It’s likely (if finances allow) that you will be given time to re-establish yourself in a career by doing further training or refresher courses whilst receiving some spousal maintenance, but as soon as you are able, you will be expected to support yourself financially. This of course does not apply to child maintenance.
By accepting that you will have to support yourself perhaps sooner than you would have liked, you give yourself the best opportunity to plan how you can support yourself financially. Of course, if money is not available for spousal maintenance, you won’t receive it. Put a realistic and sensible plan in place, and it’s more likely that plan will be supported by a court if necessary.
You need to consider your pension requirements. This will of course depend upon your age and you’re earning potential, but you need to consider how you will support yourself in old age. This is why planning for the future is crucial – it supports you to make longer term decisions. Perhaps a share of his pension it is worth sacrificing the family home for?
4. You need to evidence your position
Many people feel overwhelmed just by the thought of organising their finances on divorce. Some people are already prepared. If you fall into the first category, take it slowly.
Start with your pension (if you have one or more) – the Transfer Value of your pension can take several weeks to arrive. You can start by making a phone call to your pension provider to ask them what you need to do to receive your Cash Equivalent Transfer Value or CETV. Do this as soon as possible.
Next, gather together 12 months bank statements and credit card bills. Ensure that you include any loan agreements with redemption figures, this also applies to your mortgage. Include any investments and insurances. Having all this information gives a picture of your financial position and can add credibility to your proposals, particularly if there based on need.
If you’ll be moving out of the family home, start looking at properties. What are the costs of rentals in your preferred area and how much mortgage can you borrow, if any? Make enquiries as to whether you will be able to claim Working Tax Credit Child Tax Credit or Child Benefit as a single parent.
When you can show what you have and what you need, that makes it more difficult for your husband and his lawyer to disagree about it. Facts get separated from fiction and discussions are based on reality. You must remember however, that you cannot have a share of what isn’t there.
5. You need to compromise and be flexible
Being able to compromise and be flexible can only be based on the reality of your situation. Talking about ‘what ifs’ sets up expectations that may not be met. There can only be so many contingency plans before it becomes overwhelming and confusing. Recognise that it is likely that you will have to compromise, and you will have to be flexible, particularly if resources are limited. Being willing to compromise and be flexible will save you time and money.
Simply this – no negotiation without knowing your numbers! Take the time you need to understand what your numbers are and what they mean. If you don’t understand, ask the help! What if you have already started? Stop until you are properly prepared and you feel ready. If you feel vulnerable discussing finances with your husband, wait until you are in family mediation. You’ll be expected to see a mediator to assist you in discussing your finances anyway. Choose a lawyer mediator to help you understand the options available to you and the benefit and consequences of each. You won’t be given legal advice, but you will be supported to make your own decisions. You will also be encouraged to seek independent legal advice before agreeing to any settlement.
I’m Emma The Divorce Alchemist. I support Ladies who Leave to make smart emotional and financial decisions on divorce. If you don’t have your copy yet, you can download The Smart Woman’s Divorce Guide by completing the box below. Please note, by signing up, you will receive a series of 7 emails over 28 days to accompany the Guide. You will also receive an email from me each Wednesday morning UK time with hints, tips and advice. I sometimes promote my coaching packages too – I’m sure you understand that this is my business :). You may unsubscribe at anytime.