Real Talk for the Tough Stuff: Divorce

October 24, 2017

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Death. Divorce. Job loss. Sometimes tough stuff happens. Unfortunately, these not-so-great milestones often come with a financial impact. So, what do you do if you‘re getting a divorce? Or if a loved one suddenly passes away? Or if you find yourself with more debt than is comfortable? In our series, Real Talk for the Tough Stuff, we’ll tackle some of these situations head-on with the honest financial advice you need to get through and get on with life. 

First up, Real Talk for the Tough Stuff: The Divorce Edition

While it’s challenging to find exact numbers for the divorce rate in Canada, the generally agreed upon number is that about 70,000—or around four in ten marriages—end in divorce each year. Romantics will take heed that six out of ten marriages don’t end in separation, but for realists, that number means that more likely than not either you, a loved one, a colleague, or a friend will experience divorce at some point. 

We spoke with Lisa Purchase from Leading Edge Credit Union for some honest financial advice on how to get through a divorce with your finances intact.

First things first: sit down, take a deep breath, and have a level-headed conversation with your former partner. Break down your joint debts, balances, payments, and assets and decide what to do, what to keep, what to sell, etc. This is an emotional time, so reaching a mutual agreement might not always be possible. That’s where a lawyer can help. 

“I always tell people, if you can both work with the same lawyer that will save you a lot of money—and in some cases, time. Go separately or together, but work with the same lawyer to draft an agreement together that you’re both happy with,” says Purchase.

Of course, that might not always be possible. It’s not the end of the world if you need to see separate council, just be aware that extended negotiations can take time and ultimately money. 

Once you’ve determined an action plan, then it’s time to work with a financial expert to restructure your finances. 

“We work with our members to find a flexible solution for their finances,” says Purchase. “Often times getting a divorce means you need to restructure everything—from payment amounts, to lines of credit, to your household budget—it’s important to make a plan and stick to it moving forward.”

If there are children involved, be sure to be clear on the financial implications for their care. Things like alimony, child support, and even who pays for what in terms of clothing and extracurricular activities are all things to discuss and think about with your soon-to-be-ex partner. 

Beyond just every day finances like chequing and savings accounts, mortgages, and shared debt, there are also a lot of other things to think about in terms of the conscious uncoupling of your finances. Do you have a joint life insurance policy? What about your will? Who is your emergency contact? Chances are, these are all things that will need to be updated too.

But it’s not all bad news.  In some cases, divorce can actually be a much-needed opportunity to take stock of your finances and revaluate things. “Maybe you sell some assets and use that profit to pay off some debt. Or maybe you can take this time to think about your cash flow or financial future. A lot of times divorce forces people to take care of their finances, and sometimes, even come out ahead,” notes Purchase.

Even though your happily ever after may have passed its best before date, it doesn’t have to have a major impact on your finances. Ultimately—like most things in life—communication and being open and honest with what you want, need, and can afford, will be key in getting through this chapter and on to the next.