Divorce is challenging for all couples, but can be even more so for the vast majority who don’t have a prenuptial agreement and instead share most of their assets, such as a house, car, second home, or even the family bank account.
With so much at stake, the process can create extreme tension between partners. But understanding what the effects of divorce are before you begin the process can help you plan a fairer and more amicable process. Here’s how.
Why divorce is so financially challenging
While divorce isn’t as common as it was in the 1990s, a large number of couples do separate every year. 2020 saw over 103,000 divorces take place in England and Wales, according to ONS figures.
Every divorce is emotionally difficult, but there are several financial ramifications too. The first is legal costs. According to 2018 research from Aviva, the average couple spent just over £2,600 on legal fees across a process that can go on for over 14 months.
The same research also found that housing costs were high too – with rental costs topping out at an average of just over £7,500. And even if renting is avoided, the purchase of one or two new homes can cost thousands in legal fees, stamp duty, estate agents fees, and redecorating.
On top of that, either partner can be required to pay child maintenance payments or find themselves spending more on their children more generally.
Savings and investments are naturally affected by divorce too, as the couple may struggle to cover the increased costs from their salaries – particularly if there was a sole breadwinner in the relationship.
How to financially prepare for divorce
While the costs can be significant, there are plenty of things you can do to reduce the cost of divorce. It’s important to note that preparation isn’t the same as accepting you’re going to get divorced – many of these tips are beneficial for married couples too.
Firstly, reduce your exposure to debt. With fewer debts, you won’t have additional financial burdens to service if divorce occurs. Budgeting is a big part of this – cut out any unnecessary expenses.
It is also important to seek experts in financial planning who can help you organise and recover your finances. They will help you can take charge of the situation and guide you in the right financial direction, such as when buying a new home or flat, a car, or recouping your savings, during and after divorce.
Owning your own credit cards is also important if you’ve yet to do so. Taking one out in your name and paying off the card on time every month will let you build your own credit score, which can be beneficial when buying a house.
Lastly, create an emergency fund that covers six months of expenses. Each partner should do this anyway, just in case either loses their job or can’t work for a period of time, but in divorce, the money can definitely ease the financial strain.
With the tips above, you can safeguard your finances through a difficult time. What do you think is the most important way to ensure divorce isn’t financially damaging? Let us know in the comments section below.
