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Divorce and Financial Risk – Four Tips for Separated Couples

Divorce is unfortunately a commonality in modern life – and something that many of us will be unfortunate enough to experience. Indeed, you may already be experiencing divorce at present, and coming to understand just how stressful the process can be. The financial side of the equation is particularly sticky, given both the cost of divorce counsel and the risks inherent to splitting your joint assets. What are some key tips to smooth out the process?

Re-Budget for One

Firstly, it is important to reconcile with your new personal situation in a financial sense as well as an emotional one. Prior to your separation, you were approaching life and its costs as a team; now, you are a sole operator, and will have higher outgoings to contend with as a result. These will include heightened rent or mortgage costs (unless you move to a relative’s or friend’s to take stock in the short term), higher grocery costs and even smaller impacts like paying full price for individual subscriptions.

The costlier nature of living solo makes rebudgeting an imperative for you – particularly if certain assets and funds remain to be properly split via legal agreements. Creating as much ‘spare’ money as possible each month should be a priority, if only to keep you in the black during an expensive legal process.

Freeze Joint Accounts

If you have a joint account with your partner, each of you are technically entitled to the entirety of its contents. In the event that your joint account is your biggest joint asset by a significant margin, the legal situation gets a little more complex; otherwise, any agreements regarding the splitting of this money are essentially civil in nature. If you are relying on a legal process to ensure your financial needs are met here, freezing the account until such a process is underway is a shrewd move.

Manage Debts Carefully

Joint debts are just as potentially difficult as joint savings, and require some careful thought – ideally on both parts. Joint debt burdens – i.e.: debts that list both of you as debtors – render you ‘financially linked’ even after legal separation or divorce. This means that credit reference agencies may look at both your credit histories when drawing up a credit report, something which could negatively affect your chances of being approved for a new debt or credit agreement.

Where your ex-spouse is financially reliable, it may make sense to simplify any extant joint debts through a debt consolidation loan. This turns a complex financial situation into a single monthly payment, which the two of you can then litigate regarding repayment ratios. Uncooperative ex-spouses are less simply dealt with, as much official advice regarding their failure to repay their share points towards simply keeping banks notified. 

Breathe

Divorce is a difficult thing to go through, regardless the potential financial pitfalls that present themselves through it. The stress you may feel at needing to engage with these issues is completely valid, but needn’t be overwhelming. 

It can help to know that the people within agencies, banking institutions and legal systems are on your side, and that much of the work you need to do in order to square away your issues will be handled by them. Take your time, take some time to breathe and allow yourself some space – if only to keep your wits sharp when you do come to need them.

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