5 things to think about when figuring out divorce finances
Just 5 things to think about when figuring out divorce finances?! Really?
Finances. Financial Disclosure, does it all feel like a flipping’ faff? If figures aren’t your thing, the mere thought of it can make you nauseous and scared. Even if you know you’re numbers and you’re the Rachel Riley (Countdown numbers Queen) of your family, when it comes to divorce, you know that it could get messy and that freaks you out. Knowledge can be a dangerous thing right?
So, whether you’re Mrs Moneypenny or not, what 5 things do you need to think about first? My absolute golden rule is “no negotiation without knowing your numbers“ it’s crucial that you stick to this, however many spreadsheets of proposals your darling stbxh (soon to be ex husband) sends you, and irrespective of how many times he tells you “it’s a great offer”. Now I’m not saying it’s not a great offer, I don’t know because I don’t know your numbers. How clear are you that you know them?
Financial Disclosure is an important part of the divorce process, but it’s not part of the divorce itself. Divorce just ends your marriage. To sort out your money, property, investments, pensions and inheritance provisions, you need a financial order.
Financial Disclosure is part of that process and takes place whether you use mediation, the traditional court process, collaborative law or arbitration. It works on a kind of ‘You show me yours, and I’ll show you mine” basis. Full and frank disclosure is desirable in most cases, but you can agree with your husband the extent to which you do this. Financial Disclosure helps you get clear about the five most important things you need to think about:
1. Get clear about what you have
What you have are assets. Assets can be houses (minus liabilities such as Mortgages or secured loans), cash, investments, pensions, trust funds, dividends, anything that adds wealth. When looking at your assets, there may be joint assets such as property or cash in bank accounts for example. But you may have your own assets. Do you own another property? Does your husband? Do you own the property your husband lives in? What cash, jewellery savings pensions and investments do you have in your own name? Similarly, what does your husband have? Do you, and or your husband own a (profitable) business or one where there is significant capital asset such as a farm?
2. Get clear about what you owe
What you owe are your liabilities. Mortgage(s), loans, credit cards, money owed to family. You need to be clear about who is liable for the debt. The debt that you and your husband have in joint names is shared debt. But that doesn’t mean that you’re only liable for half of it – no. It means that in default either of you is liable for the total amount and the loan company, credit card company, or bank, doesn’t care who pays it, so long as it’s paid…. if your case gets referred to a debt collection agency, then they’ll often pursue the ‘weaker’ party if they think that they’ll pay it. It’s important therefore that you a) inform your bank/credit card companies of your separation and limit your overdraft facility so you still have access to the accounts yourself. You maybe advised to freeze any joint accounts, credit cards etc if you and your husband are unable to agree how to run these accounts when you separate b) ensure that these liabilities if not settled prior to a consent order being issued are clearly dealt with within the terms of the order.
Any liabilities in your sole name is legally your responsibility. So for example, your husband bought a motorbike on your credit card. You’ve never even been on the thing, and you certainly don’t want it as part of the settlement – he can keep the blooming bike. You may feel it’s his responsibility to pay the debt and morally, you may have a point. But in law, the debt is yours and if he doesn’t pay, its you who’ll be chased.
It’s important then to get really clear about who spent what when and how, because you can discuss this in Mediation. Mediation is a great place to discuss the realities of family finance without the letter of the law sticking its nose in. Mediation is about the two of you working out a compromise that leads to an Agreement that you can both live with – that feels fair to you, not a judge.
3. Think about what YOU want
Thinking about what you’d like from divorce is sensible. The clearer you are about what’s important to you, the clearer you can be in your communication with your husband and your lawyer. As a Divorce Coach one of the things I do is help ladies get clear on this as it’s sometimes harder than it appears. If you’ve spent years putting the needs of your family first – raising the children and supporting your husbands career or you’ve been the main breadwinner, actually thinking about YOU can be an alien concept. Thinking about you doesn’t start with the phrase “Well I think my husband would like me to….” or “I think my husband will give me…..” or “What’s best for the children is…” it actually starts with “What I’d really like is….” no really, that’s what it starts with. So tell me? What do you really want? Has that stumped you?
Perhaps you’d like to work on that and let me know how you get on. Want to chat about it? You can book time with me here Chat with Emma
Remember that asking for what you want doesn’t mean you’ll get it, but you won’t get it if you don’t ask. It’s all about the starting the negotiation process.
4. Think about what you need
‘Needs’ are not necessarily the same as ‘wants’. They are however, just as relative. Need money to continue to send your child to the exclusive school you and your husband agreed was the right thing for your child? If there’s money to pay for it, that might be reasonable. Need some spousal maintenance to get back on your feet and keep a roof over the children’s heads? Reasonable.
When you think about your needs, play out your family life in your mind. How much does it cost to get all 3 children’s hair cut, kitted out in shoes and trainers and football boots and riding hat etc. How much are you spending on Birthday gifts for their friends, school trips and the like. If you don’t add it up, you won’t necessarily get what you actually need. The caveat to all this however is, what’s realistic. That comes when you about think about point 5 below.
5. Think about what he wants and needs
It would be very unwise not to think about what your husband wants and needs too, however much this may irritate you (and it might not)! Just as you need to move forward to a new life, so does he. He needs a home. He needs somewhere for the children to stay. He needs to feed himself and have a life too.
How ever wealthy you are (unless there’s millions), you are both likely to see a change in life style to some degree. Because what was funding one family, now has to support two. Most people have to accept compromise. For some it’s leaving the 5 bed house with gardens to a 4 bed house on an estate. For others it’s going from a 4 bed to a 2 bed home and for others from home ownership to living in a rental property. If you consider his needs from the get-go, you will have some idea of the likely outcome for you, begin to readjust AND prepare your children.
So there they are the 5 things to think about when figuring out your divorce finances. If you’d like support with this, you can apply for your free 30 Minute consultation here Chat with Emma
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.