This series of blogs is purely focused on processes to help provide a step by step guide to sorting out different issues. The first blog looked at divorce and now we’re looking at sort out money.
Sorting out money issues can seem hugely complicated and many people feel utterly overwhelmed because they just don’t know where to start and how to tackle this huge issue. Essentially the process can be broken down into three main stages:
1. Information gathering and exchanging.
You can’t make decisions about money until you know what money you have. So you need to get together information about your finances and then exchange it with your ex partner so you get their documents (or copies of so you still both have your own information) and they get yours. You each then look through this and clarify anything you’re not clear about. This might be asking them to explain something, or it might be asking for more documents, or information, so you feel confident that you have all the information you need to make informed decisions.
The length of time this takes can vary dramatically. If you’ve handled money jointly during the marriage then you may both be familiar with what you have already. If one person tended to take care of finances during the marriage then the other person may need to ask more questions because it’s something they’re not familiar with. They may also need some help understanding certain aspects of finances. It will also take longer if you have a number of assets than if you just have a house and a job and that’s it.
2. Looking at what you need
Looking at what you’re going to need is also an essential part of the process. Firstly, both of you need to have somewhere you can live. That’s really important and there are different ways of housing yourselves. One of you might remain in the family home, or you may both find new homes. You might be renting, or buying another property, or you might look at a shared ownership property so you need less capital. It can help to look at different options so you have an idea of the different costs involved in each.
You also need to know how much money you need to live off to pay all your bills and outgoings over the course of the year. This should include things you pay for monthly and yearly, and also some budget for unexpected happenings like the washing machine breaking down. Start with what you would like your life to look like. You can always trim down your expenditure later if the figures don’t match up (or look at increasing your income).
You may also have other needs such as a new car (maybe you only had one family car and you now each need a car?) or you might need to purchase furniture or other large household goods like an oven or a fridge.
Some people think they should work out what money they will get and then look at what that could get them but it’s far better to know what you need and then tailor the resources you have to meet those needs (even if you have to revise your expectations a bit and be a little creative).
3. Looking at how what you have can meet your needs
Once you know what your needs are and what money you have, you can then look at how you can use what money you have to meet your needs. This part of the process is often an exercise in negotiation, but also in creative thinking, and making your money go as far as possible. It also gives you a chance to look at whether you’re maximizing your income, and/or whether you could be a bit smarter with the resources you have by trimming your budget, or by looking at other options like shared ownership properties, or the government’s Help to Buy scheme.
If you find it hard to talk about money between yourselves then you can use different processes to support you in finding a resolution to money issues. These are:
• Family mediation – usually the quickest and therefore most cost effective process. You talk about things together in the same room but a mediator helps to structure your discussions (and the providing of financial information) and provides information and suggestions to help you.
• Collaborative practice – this is similar to mediation in that you discuss things round a table but you each have a specially trained lawyer rather than one specially trained mediator. The emphasis is on being constructive and putting your children’s needs first. Everybody agrees to resolve things in that process and not go to court.
• Negotiation – this can take place between yourselves or between lawyers, or a combination of the two. It can also be done round a table rather than with letters going backwards and forwards.
• What these three options have in common is that you both decide what happens for you regarding money – with support. If you can’t decide then you look at one of the processes below where somebody else makes a decision for you (and then you have to abide by what they say)
• Court process – in the court process everybody uses the same process regardless of whether you have £5 in the bank or £5 million. You get on the wheel and you stay there until everything is resolved.
• Arbitration – if going to court is like having an operation on the NHS then arbitration is like going private. You appoint a qualified arbitrator (either by choosing someone recommended to you or by asking the Institute of Family Arbitrators – IFLA – to chose one for you) and you can tailor the process to your individual needs in terms of how it is structured, how much information you provide and how quickly you want a decision.
Once you have found the resolution that you think will work for you, you then look at formalizing this to ensure that you both stick to what you’ve agreed.
If you’d like more in depth guidance on sorting out money as part of your separation then you can download a video webinar together with a workbook that will talk you through resolving money issues step by step. Have a look at our online shop.
Other blogs you may find useful:
Sorting out the money: how does it work?
Sorting out the money: Practical tips for property and mortgages
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