Money, Money, Money
Those of you who have been through a divorce will know that, more often than not, it leaves not just a hole in your heart but also a large one in your bank account. So, if it’s time to talk divorce then it’s also time to talk money.
Recently our MELCA Director, Tricia Peters, was featured as an expert guest on the Good Divorce, a podcast dedicated to exploring ways to achieve just that. The recent episode ‘Money, Money, Money’ focuses on the financial aspect of divorce, preparing listeners with everything they need to know for their journey to financial independence.
Trying to navigate this turbulent process in a way that leaves one feeling confident, empowered and independent all whilst being financially secure is not an easy feat.
Why a collaborative process works
We’re sure you’ve heard the age old saying that money is the root of all evil. Well in the case of divorce it’s hard not to believe this. Often in these circumstances money has a bigger significance than just that of coins and notes. It represents power, security, control; it can become a weapon to defeat the other. This has become common for divorce under our current system.
Yet “the current family law system, or in general the legal system, doesn’t seem to be the right system for families to work out how they’re going to share their wealth. The system has no place for reasonable discussions or to deal with the issues that they’re in conflict over” says Tricia.
What we need are spaces where collaborative negotiations can take place. Places which are conducive to discussions that let the couple explore their options in a peaceful way, outside of the court-room. Multidisciplinary teams are needed to ensure all areas are covered, allowing the couple to see the entire financial picture.
Tricia explains that these collaborative spaces and processes work for those “who are used to having control …. the benefit of collaboration is that [there are] people on the team, particularly psychologists, who really understand what’s going to drive a person not to come to a settlement”.
Why your divorce is the only one that matters
Every relationship is unique and every situation different. It is often assumed that a fair divorce is one that results in a 50:50 financial split. However, this fails to take into consideration crucial factors like disparity of income, superannuation savings, interrupted careers due to child-rearing responsibilities, higher healthcare costs and lower personal savings. Within all divorce cases there are distinctive factors like these that need to guide how the money and assets should be divided. It is crucial to understand your own circumstance and what you need to achieve fairness in your own context.
Generally, the first thing on a person’s to do list when going through a divorce, is to hire a lawyer. Although it is necessary in certain cases to have someone to fight for you, often their professional advice is seen as enough. Most lawyers are unaware of the benefits and importance of also working alongside a divorce financial planner.
A divorce will have a tremendous impact and change the entire landscape of your financial situation. Understanding these changes and the implications that they have on your lifestyle is pertinent to feeling confident and secure financially.
Do you need to come to terms with the fact that you are no longer a homeowner, or have less financial security that you are accustomed to? Or perhaps you are in charge of financial decisions for the first time? You may want to understand the real costs of raising your children, or the impact on your day to day business operations. Whatever your situation, ensuring that a financial planner is on your team is essential for your financial health and independence.
Don’t Involve the Kids
For many, divorce is when marriage ends and war begins. This war can be ongoing and whilst it is rarely the intention, children are usually caught in the middle of this high stakes contest.
Tricia pleads parents to keep the children off the battlefield especially when discussing finances, she explains that “children will often take [it] onboard as their fault. If only I hadn’t asked to have a special party or do that special activity”.
“They will turn it on themselves. It’s the worst thing that parents can do. You must present a united front to the children … even if you’ve had the biggest fight about that behind the scenes. The children don’t need to know that”.
Divorce is frequently complicated and painful. No one goes into their marriage expecting to get divorced. The main thing to remember is that you’re probably going to spend the rest of your life bringing up your children with this person, so try to replace the conflict with co-operation. Co-parenting throughout a divorce should involve sharing information that makes the kids feel secure in their family life but never sharing so much that they are pulled onto the battlefield.
Tricia’s 10 Tips About Money and Divorce
- Don’t believe that fair equals 50:50
- Don’t keep the house if you can’t afford it
- Look at the whole financial picture, not just one issue at a time
- Don’t forget life insurance – the lack of it could affect your family’s financial wellbeing
- Make decisions based on good information rather than what you think would be done in Court
- Work with a divorce financial planner
- Ensure that your assumptions about income, asset growth and budgets are realistic
- Don’t focus on a single option. There is a real place for creative thinking
- Don’t think of a financial settlement as a way of addressing emotional pain
- Make decisions that are sustainable and cater to your realistic future needs