Covid-19 breakups have thrown the spotlight on how to deal with finances as the pandemic plays havoc with relationships.
Along with multiple lockdowns, rising stresses on the average couple include job losses, ludicrous property prices and indefinitely – a combination of events expected to trigger an increase in divorces, according to global industry analyst IBISWorld.
Its research forecasts the number of divorces in Australia will rise by 4.3 per cent in 2021 to 52,117 because “high unemployment and poor consumer sentiment, largely due to the Covid-19 pandemic, have caused financial strain on relationships over 2020 … a key contributing factor for couples filing for divorce”.
Fortunately, there are plenty of things couples can do to ease the penny pinch of splitsville, says author, mediator and family lawyer Kirsty Salvestro.
“According to the ABS, in 2019, there was one divorce for every 2.3 marriages; that is a 43 per cent divorce rate for every marriage,” Salvestro says.
“It is forecast (by IBISWorld) that the number of divorces will rise … in 2021 to 47.3 per cent.”
Throw in working on top of each other, home schooling kids and separation from family and friends and it is no wonder coupledom has turned into a pandemic powder keg.
Given such sobering projections, Salvestro’s new book, What Are We Fighting For?, explores the common money mistakes couples make when they separate, while imparting practical advice for safe passage for both parties.
Here, Salvestro offers her straight-shooting advice for those who find themselves newly single.
TAKE A BREATH
Know your own financial position and your combined financial position before attempting to move forward.
“Many couples go straight to seeking legal advice without a clear picture of their finances,” Salvestro says. “They often have no idea what they can afford and what options they have available to them.”
WHY START WITH LAWYERS?
Sure, it is dramatic and they do it in all the movies, but calling in the lawyers can be an early misstep. Splitting couples need to understand the financial process, so they should get financial advice first.
“Seek out information on how the process works, look at all the options you have available and understand what you need to consider when looking at outcomes,” Salvestro says.
MIND THE ASSETS
Prematurely moving assets around can be another pitfall.
“When there is any level of distrust, instability and insecurity, selling up assets too soon can prove a costly error,” Salvestro says.
Too often this is an emotional decision, not a practical one. If you ignore the numbers and transfer or sell the house without advice, you could find yourself struggling later and even skidding backwards.
FAIR MAY NOT MEAN 50/50
“The legislation requires that you consider the contributions you made at the start of the relationship, what you contributed during the relationship and what your future financial needs will be,” Salvestro says. “This calculation does not automatically mean an equal split.”
DO YOU GET YOUR DEBT?
Have your assets valued properly and familiarise yourself with your matrimonial debt obligations.
“If you do not know what the value of your assets are, or what liability responsibilities you both have, you may place unnecessary stress on your settlement negotiations,” Salvestro says.
HOW TO SPLIT THE TAB
Author, mediator and family lawyer Kirsty Salvestro shares her top money tips for when you split.
- Stay calm and do not take any drastic action. Avoid aggression and emotional decisions.
- Seek information on all available legal options, including mediation and collaborative family law, rather than only engaging lawyers.
- Get as much advice as you can from other professionals like counsellors, accountants and financial planners, especially before selling or transferring assets.
- Put yourself in your partner’s shoes. Consider how they are feeling and what options they might be contemplating – it is a generous approach with the benefit of helping you prepare to negotiate.
- Willingness to compromise makes you less likely to miss the solution that works for everyone.
Source: Flourish Family Law
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