Financial confidence crucial for life after divorce

Choosing to divorce is rarely an easy decision to make, and it’s often one that people grapple with for months or even years before moving forward. There are many reasons people decide to stick with an unhappy marriage, even if they’re not convinced issues can be resolved. However, where money is a worry, financial planning can provide support and confidence to take the next step.

The New Year is often associated with couples putting an end to their relationships. From the pressures of the festive period to considering what the future holds as another year starts, it’s often a time of reflection. In fact, the trend has led to the first working Monday of the New Year being dubbed ‘Divorce Day’ and relationship support charity Relate experience a 13% increase in calls and a 58% rise in website visits during January.

While divorce can be an emotionally traumatic and challenging time in your client’s life, remaining in an unhappy relationship can be far more damaging, both in the short and long term. Yet, research from Relate found that a fifth of those in a relationship are staying together despite describing it as an unhappy partnership.

Unsurprisingly, staying together for the sake of children was the top reason for doing so. But ‘we can’t afford to break up’ wasn’t far behind, after being cited by almost a quarter (24%) of people feeling trapped in relationships. For individuals in this situation, it can often feel hopeless and like they have no other choice but to remain with their partner. It’s a situation that can lead to higher levels of stress, depression, and unfulfillment.

Improving financial confidence and independence

For those struggling to see how they’ll cope financially alone, it’s easy to see where concerns can stem from. Not only will they be financially independent and possibly relying solely on their own income, but there are other factors to consider too. Divorce could mean having to find a new place to live, paying out child or spousal support, and splitting other assets. At a time when they’re already facing upheaval, the changes to their financial situation can seem insurmountable.

It’s a challenge that improving financial confidence can help with. Understanding how their financial situation will change, what they can do to improve it, and the long-term impact of divorce can give those struggling with the decision the confidence needed to proceed if that’s what they decide is right for them.

So, how can we help your clients who have concerns about their financial security if they move forward with a divorce?

Lifetime financial forecasting allows us to build a visual representation of their wealth, and how it will change over time. As divorce is typically a time of uncertainty, the ability to model potential decisions and events can help.

For example, clients can use the cashflow modelling process to understand the impact of:

  • Using their savings as a deposit for a new home
  • A Pension Sharing Order resulting in a reduced pension fund
  • Paying child support on a monthly income
  • Supporting themselves on a single wage
  • Losing a portion of other assets, such as investments

Removing the fear of the unknown

For those in unhappy relationships contemplating divorce, it may be the fear of the unknown that’s holding them back. After all, it’s a life-changing decision. While we may not be able to help when it comes to understanding how every aspect of their life will change, we can remove the fear of the unknown when it comes to finances.

With the results of cashflow analysis, clients are in a better position to understand how divorce will affect them financially and the necessary steps to secure their financial future. It’s a process that can help put money concerns and fears into perspective.

Divorce is likely to be a time when clients evaluate what they want from life too. Once shared aspirations and goals may be very different now that they’re no longer with their partner. Financial planning can help qualify your new aspirations and how your assets can best be used to align to your new goals. At a time when lives can feel turned upside down, financial planning can provide some focus and the foundation to build a more optimistic future.

By working in partnership with other professionals during the divorce process, we aim to provide effective support to clients experiencing the breakdown of a relationship, helping them to make decisions that are right for them.