Getting a divorce is difficult enough without having to worry about the financial side. The average cost of getting divorced is around £14,561 in the UK. This includes legal fees and the costs of changing your lifestyle.
With 42% of all marriages ending in divorce, it’s important to go into your marriage fully prepared. A prenuptial agreement can help to ease some of the strain if you do decide to part ways, but this isn’t the most romantic start to a relationship. Many couples overlook this important step on their path to marriage.
If you’re heading for a divorce, here are a few things you need to know about divorce and your finances.
Divorce is expensive
As we’ve outlined above, a divorce can cost nearly £15,000 in legal fees and living expenses. And this doesn’t include the losses you may make as you divide up your assets. The easiest way to settle a divorce quickly is to divide assets on divorce equally, but this can mean you lose some things that you love. For example, you might have to sell your home or your cars to be able to split the value.
It applies to businesses, too
If you have started a business together, you will have to think about if you can continue working together. There are a few different ways you can manage this. You could either agree to continue working together, or one partner could buy the other out. You could also agree that one party would have no continued involvement in the company but they would see a share of future profits. Couples will rarely decide to sell the company to split the proceeds. Instead, one party will usually carry on running the company while offering some kind of financial incentive to their ex.
It can impact your credit score
When you are married, you are financially linked to another person. Joint bank accounts will appear on your credit file, which means if your ex gets into financial trouble, this could be reflected on your credit score. After a divorce, it’s important to check your credit score regularly and make sure there are no mistakes on your file.
Once you have closed all joint accounts, you can apply for the financial connection to be removed from your credit report. If you fail to do this step, you could see your finances negatively impacted by your ex’s behaviour. Likewise, the association could be keeping your credit score up, so once you cut this financial relationship, your credit score may fall. This can impact everything from your ability to rent a house to the interest rates offered on any lending products, so you must pay attention to any changes.
It can clear out your savings
It’s not uncommon for couples to be pushed into financial difficulty after divorce. It’s easy to run down your savings when you have bigger things to worry about. You might find your work suffers as a result of the upheaval. And if you have to adjust to life as a single parent after a divorce, this can be another strain on your finances. While you will have previously split all living expenses down the middle, you will now be responsible for paying the full amount. Keep a close eye on your finances and your savings, and make adjustments to your lifestyle as required.
You may have to make compromises
Unless your partner is feeling generous or guilty, it’s unlikely that you will get everything you want in your divorce. This might mean you have to give up your car, sell your home, or give up other marital assets. If one of you wants to stay in the family home, you may have to give up another asset that is equal to half of the value. This could mean that you get the home and nothing else.
In general, there are no “winners’ following a divorce. Anyone heading for divorce expecting to win is likely to be disappointed. Instead, you should aim to manage the divorce proceedings with your mental health intact so that you are ready to rebuild your life and your finances.