The cost of living crisis is top of the news agenda right now and affecting the vast majority of all of us in one way or another. Statistics from the ONS indicate that 93% of adults living in Great Britain are experiencing a rise in their cost of living. Many people are having to take on loans or look for extra work to afford life’s essentials. Financial worries can cause problems in personal relationships, as couples and families adjust budgets and look at ways to increase income and save on outgoings.
A cost of living crisis such as this can often highlight issues in personal relationships that were not as serious, or even apparent previously. For example, differences in financial priorities or spending behaviours. Added pressure can also reveal hidden debt, secret loans or gambling problems that can undermine trust in a relationship. A lack of money can also exacerbate other issues that had been boiling under the surface. As can the uncertainty of living in ‘limbo’ and not knowing what aspect of life will be affected by financial concerns next.
Tighter finances can also cause serious problems by trapping an unhappy partner in an unwanted relationship if they feel unable to afford the costs associated with leaving their partner and branching out alone. If someone feels unable to access the funds they need to buy essentials, or finds that their financial independence is being reduced by a controlling partner, this can rapidly escalate into a case of financial abuse.
Divorcing during a cost of living crisis
If married spouses or a couple who have entered into a civil partnership decide to separate against the backdrop of worsening financial problems and the cost of living crisis, there is a lot to sort out to ensure that both parties can leave the relationship with as fair and workable outcome as possible. If the couple is open to trying to work things through, a family solicitor can offer mediation services, or recommend a third-party arbitrator to help resolve any conflicts or concerns and see if there is a way forward for the union to continue.
If, however, the couple is determined to separate, the divorce process will need to be put into action. Providing for children and other dependents financially must be the top priority in this case. Calculating what assets and funds each party has – and what they and their dependents need to weather the cost of living crisis – is especially important to get right during economic uncertainty. It will be far harder to predict what each person’s living costs might be with rapid political changes and unexpected price hikes coming into play.
What to consider
The financial settlement calculation process should begin with each party carrying out, to the best of their ability, a full and comprehensive review of their current income and outgoings, as well as known future adjustments that they are able to confidently predict that could affect their proposed budget. All parties should also take into account the fact that repeated reviews and adjustments of any proposed financial settlements later on will lead to unwanted additional costs associated with having new agreements drawn up, updated and approved. So careful thought at this early stage into what each party will realistically need to live on can help save additional fees further down the line.
Aspects of a divorce settlement that involve looking after a dependent who may have changing financial needs, such as child maintenance, should be agreed on a self-renewing basis. In other words, try not to be too rigid with things like this, as there could be unexpected alterations to the funding needs, which could go up or down depending on the child(ren)’s stage of life.
Work out the potential future values of marital assets, as well as gathering existing figures, since valuations can go up and down according to the economic climate. It is prudent to future-proof your financial settlement as much as possible and make compromises to ensure each party is covered. For example, allocating all the property to one side and hard cash and savings to the other could result in financial disparity later on. If the housing markets crash or mortgage rates rise really high, the person holding the property could be at a distinct disadvantage if they need ready access to cash to live on. Interest rate changes will also significantly affect savings and cause financial imbalance between the divorcing parties.
Agreeing such matters on a percentage basis could be more sensible while the economy remains so volatile, in order to protect all parties. As with most financial issues of this nature, consulting a financial expert in conjunction with a family solicitor is wise.