Even with the introduction of no-fault divorces in 2022, divorcing can still be a costly and emotionally taxing experience, with expenses that could easily reach thousands of dollars.
The cost-of-living crisis, fueled by increasing inflation and interest rates, can add additional strain to any relationship, but even more so, to one that is already under pressure. With the current uncertainty in the housing market, you may be hesitant to sell your property and find a new one, which can further compound the issue.
If you’re considering separation, which is the first step to a divorce, you might be questioning the value of postponing it until the economy stabilises, house prices rebound, and interest rates and energy costs decrease
Here are some factors to take into account:
The Effect of the Cost-of-Living Crisis on Divorce
The current economic downturn can exacerbate existing relationship strains due to financial worries. Couples considering divorce may find themselves arguing more frequently over day-to-day expenses, bills, and financial arrangements. The costs of separation can also compound these challenges.
Alistair Carter, the Managing Director at Mediate UK, anticipates that escalating costs will further strain already challenging relationships. “We anticipate that the cost-of-living crisis, along with interest rate hikes and economic uncertainty, will intensify tensions in some struggling relationships, leading to more separations and divorces,” he notes.
Mediation services seek to assist couples in reaching a resolution regarding finances, property, or children with minimal court involvement. The cost per session is typically around £120 on average, and the total expense will vary depending on the number of sessions required.
Carter further explains that the average divorce can take approximately 11.5 months to reach a final settlement, and if a court is involved in deciding how assets should be divided, it can cost upwards of £20,000 (approximately $40,000 NZD).
In my separation, it took almost 12 months from when I left the marital home, for the house to be sold and for me and my ex to agree the final settlement. We didnt need to go to court at that stage, but legal fees, wracked up by the constant to-ing and fro-ing, still meant my legal fees were the best part of $15,000 NZD.
During that time, I did not receive any support payments from my ex for me or our two children.
Additional expenses linked to divorce can include:
Court fee for divorce or dissolution application per couple: £593
Financial consent order: £53
Average solicitor fees for uncontested divorce as the petitioner: £450-£950.
It’s important to consider additional costs such as creating a new will, fees for child arrangement plans, and potential charges for financial advice.
Is it Wise to Delay Divorce until the Cost-of-Living Crisis Subsides?
The appropriate response to this inquiry will depend on your individual circumstances.
An important factor to consider is whether you can financially manage to maintain two separate households. If this is not feasible, you may have to postpone the divorce until your financial situation improves, or until you are able to afford the costs associated with moving on. If you have the support of extended family or friends who can offer temporary accommodation, this may be a viable option for one or both of you. It is essential to clarify this arrangement with legal advisors or mediators to prevent potential issues regarding the abandonment of the marital home or child custody arrangements in the future
It is possible to initiate divorce proceedings while still residing together, but it may be necessary to establish a formal financial agreement that enables both parties to sustain separate residences.
Key Considerations when Financing Two Separate Households during a Divorce
When a couple separates or divorces, one of the significant challenges is to manage the expenses of two households in the future. This includes considering the upfront cost of purchasing two homes, as well as the availability and affordability of a mortgage. Although house prices dropped slightly at the end of 2022, they remain high. Additionally, rental properties are in high demand, resulting in rising rents and increased competition. Your credit history, or lack thereof, may also be a factor in securing financing. If you need to take on debt, it is crucial to borrow responsibly.
Strategies for Dividing Investment Assets during a Divorce
When it comes to dividing investment assets during a divorce, there are several factors to consider. Here are some things to keep in mind:
Find out the current value of your investments and any restrictions on cashing them in.
Keep in mind that pensions may not be easily accessible if you’re on a final salary scheme or under 55, and withdrawing money from your pension could impact your ability to make future contributions.
Consider agreeing on a division of investments with your spouse and making the agreement legally binding through a financial consent order.
If your solicitor or mediator is not qualified to give financial advice, it may be worth seeking advice from a financial adviser.
Assessing Financial Readiness for Divorce: How to Determine If You Can Afford It
The MoneyHelper website offers a free online calculator(Opens in a new window) that can help you determine whether you can afford a divorce. By assessing your financial situation, the calculator can assist you in planning how to not only survive financially but also thrive after your divorce.
If you’re currently unemployed, you’ll need to think about how you’ll cover bills and housing expenses in the future. This may involve seeking employment or applying for government benefits, such as universal credit(Opens in new window), which can assist with housing costs.