The breakdown of a relationship can take a toll on your emotions and wellbeing, but what about your pocket?
Research from Aviva shows that 68% of couples who separate or divorce, have financial matters to settle. Furthermore, with 2017 divorce rates up by 6% over the past three years, and at their highest level since 2009, that’s thousands of people who could face significant financial turmoil.
The research shows that divorcing and separating couples spend an average of £14,561 legal and other costs during the process. That’s an increase of 17% from 2014. The same data shows that settling financial matters takes an average of 14.5 months following the breakdown of a marriage or relationship.
Last year 247,372 marriages were registered in England and Wales, while there were 106,959 divorces. While the long-term trend is downwards, that still represents a large percentage of marriages ending in divorce, bringing with it emotional and financial issues to address.
Living arrangements
Despite their financial circumstances forcing 16% of divorcing couples to continue living together, most will naturally want to live in separate homes.
The research showed that 40% of divorcees found setting up a new home was their biggest cost, behind legal fees. It also found that:
- Those who purchased a new home (16%) after their separation spent an average of £144,600 per person.
- Rather than buying immediately following their breakdown of their relationship the majority, 51% move into rented accommodation, incurring total costs of more than £35,339 over the average length of their tenancy, 4.7 years. The research also found that the average cost of rent, £7,519 per year mean that 70% of renters feel they are unlikely to be able to buy a home in the future.
- Of homeowning couples, 46% sell their property and both relocate. Doubling the financial stresses of the divorce, while elongating the process whilst the sale is finalised, and the money becomes available.
- Those who choose to stay in a shared home, whilst their former partner moves out, will spend an average of £2,369 on redecorating.
Legal fees
54% of people going through a divorce found legal fees to be one of their main expenses. From 2014 to 2017, the average amount spent on legal fees during a separation has increased by 109%, from £1,280 to £2,679 per person.
Legal fees, which may be incurred include:
- Court fees to file for divorce: £550
- Court fee to disagree with a divorce petition: £245
- Hiring a solicitor, if necessary
- The cost of hiring a mediator, if necessary
- Covering the legal fees of the other party, if agreed or ordered to do so
Where children are involved, the additional legal fees surrounding custody have reached an average of £5,671. This is up by 62% from 2014.
Financial stability
The financial strain of divorce and separation has led to people relying on savings and borrowing to support themselves throughout the split:
- 31% used savings
- 26% turned to credit cards
- 23% borrowed from friends and family
- 6% cancelled or downsized their insurance and financial protection
- 6% cut down their pension contributions, or stopped paying into their pension altogether
The key to avoiding financial stress: being prepared
Let’s be frank; some marriages end in divorce and some don’t. You don’t want yours to be one of them, but taking steps to protect both of you financially just in case can only be a good thing.
There are two possible outcomes:
- You unfortunately do get divorced and your preparation saves you both from financial stress at an already difficult time
- You reconcile and enjoy the financial benefits and added security of your preparations anyway
So, how do you prepare for something that might never happen?
The key is to be financially organised and prepared for unexpected events (something which is always sensible anyway).
For example, reducing debt to as low a level as practically possible and building up savings, will help you deal with the financial consequences of divorce or separation.
Creating as much equity in your property as possible is also important; it will help you both should you decide to buy new properties.
Finally, research shows that money problems are the third largest causes of divorce in the UK. Therefore, careful financial planning to help you deal with the effects of a relationship breakdown might actually stop it happening in the first place.
Of course, if the relationship can’t be saved then keeping the channels of communication open is crucial. So is professional advice.
A financial planner can work with both parties (or one if that is preferable) to produce a financial plan which deals with the financial issues resulting from the divorce or separation and plots a course to financial security and ultimately, a new life.
If you know someone who is considering divorce, or separating from their partner and believe they would benefit from additional financial support and guidance we are here with a sympathetic ear.
