After years of working with couples, a consistent theme has emerged.
Generally one person in a relationship manages the majority of the finances.
This person is typically charged with the responsibility of the day to day paying of bills, the mortgage and generally managing cash flow.
Unfortunately a reality of our society is separation. With approximately 1/3rd of marriages ending in divorce, this raises an interesting situation for the individual who hasn’t been been as active with the finances.
A lot of clients we work with are female divorcees. We see a tremendous amount of insecurity & vulnerability. Sometimes they have some help from another family member, most of the time not. All of a sudden they are thrown in the deep end financially and must either sink or swim. Throw a truck load of emotion into the equation and it is a highly stressful time of life.
Some people are happy to be separating and glad to be free, some people are still in shock or mourning. Regardless, divorces can force change and in the long run can be a positive thing as the individuals are now free from something they didn’t want to be a part of.
When working with a client that is in the thick of this journey, we focus on five key points:
1 – The one who holds the money, holds the power
No, we are not advocating that you siphon offshore bank accounts. Just be aware of who controls the cash.
Let’s say for example person X tells person Y – “I am done”.
Person X has $60,000 in cash sitting in a bank account. Person Y has $5,000.
Person X has the ability to access much larger arsenals to engage lawyers, and get legal proceedings underway.
So the first thing you’ll be aware of is the one who holds the cash or access to solid amounts of cash, actually holds a lot of power from a legal perspective.
2 – Make sure you set a budget
Not a budget in a true sense of the word, just acknowledging how much you need to live. Rather than focusing on months and years, just focus on weeks and days. How much do we need to get through this week, just to keep the lights on and food on the table?
The big question to ask then is, where is that money actually going to come from in the future?
Remembering point number 1, “The one that holds the money, holds the power”.
I have seen a lot of people that that have commenced divorce proceedings but rolled over and went back to a bad relationship just because they didn’t have cash to survive.
3 – Be absolutely aware of emotion
Beware of emotion around spending. Typically an individual is in turmoil when there is great change in their life. Potentially there is the tendency to fly off the handle financially and “let loose”.
The other scenario may be there is actually the opportunity to repair the fundamental issues in the relationship. A partner may throw the other an “olive branch” and want to work things out. This moment of chaos might have been what it took to bring about change in the marriage.
Understanding what lead us to this current scenario and why separation is taking place is essential. If personal problems are not addressed now, they may continue to be recurring themes in your life.
4 – Work on what is truly important to you
It may be putting your kids through a private school. It may be the family home or it may be the cat or dog.
Defining what is truly important to you is critical.
A lawyer we work with told a story of a couple who spent approximately $20,000 in legal bills arguing over their spoon collection (worth probably around $20). For them it was all about winning.
Don’t let your ego get the better of the situation. Stop and think about what’s truly important to us because this will have a massive financial consequence.
5 – Seek some professional financial advice
Engaging an experienced professional without any direct emotional involvement is crucial. They will analyse the situation in black and white and work on reporting back on your position.
Ideally you want to avoid going to court because it’s incredibly long, emotionally involved and it just costs a lot of money. The alternative will be a negotiated settlement. Offers get thrown across the table so you need to know what your bottom line is so you can action the things that are truly important to you.
When an offer is presented you can then negotiate from the position of strength because you know what level of money you will actually need to survive.
Lots of people get hung up on what percentage they receive in the settlement. By settling for a smaller percentage you may actually save yourself 6 months worth of pain & stress and still have enough to support yourself, your family & your lifestyle.
Focus on what is really important to you. This is much more important than just winning.
Navigating these waters can be tricky during such a stressful period of your life. If you are looking for an independent voice, contact Rothgard today.
“This document or website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making an investment decision. Charter Financial Planning Limited and its authorised representatives do not accept any liability for any errors or omissions of information supplied in this document except for liability under statute which cannot be excluded.”