How to protect your finances during divorce

Strictly Come Dancing celebrated its 20th anniversary last week. Over the years, it has become known for sparkle and showbiz, but it has also gained a name for something far less positive. The number of celebrities who faced upheaval in their relationships after being on the show has given rise to the myth of the ‘curse of strictly’. Sadly, not everyone makes it to their 20th anniversary, and the cost of divorce can be horrendous.

Technically, the fees can come in under £1,000 if you do it all yourself – but if you have anything other than an incredibly straightforward split, you run the risk of making an expensive mistake. The average total cost for a divorce is around £17,400, but the more there is to sort out, and the more acrimonious it is, the more the fees can mount.

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The cost of divorce doesn’t start and finish with the price of the legalities either. A survey from Legal & General found that around half of people who had been divorced said their incomes fell by around a third – so they have £9,700 less to live on. Given that the cost of running a household has soared so spectacularly in recent years, it’s no surprise that recent figures show 270,000 couples have put off getting a divorce because of the cost. There are, however, a few ways to protect your finances during the process.

Try to keep things as amicable as possible

This is easier said than done, but the more you can reasonably agree between you, the less you’ll spend on lawyers. However, don’t let your ex use your efforts to stay on good terms against you. If they’re making threats to bring in lawyers if you don’t agree to something unreasonable, don’t be bullied into a poorer deal, because your lawyer can take them on.

Don’t overlook the pension

Ignoring the pension feels cheaper, because they can be expensive to value and to split. However, it’s well worth the money. If your spouse has been building a sizeable pension or SIPP, it could be worth more than the equity in your home. You should get a pension valuation as part of the financial disclosure, and it may be worth paying an adviser to check the numbers. They can also help you pick the most appropriate way to share the pension.

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Set a tight budget

It’s easy to run up debts during a split, because you may be paying lawyers and are facing the expense of setting up a new household at the same time. It makes sense to draw up an emergency budget to cut your expenses as much as possible during these first difficult months to keep the financial damage to a minimum.

Consider joint products

If you’re both named on the mortgage, then you’re both liable for the full amount, so you should try to maintain payments for now. If that’s impossible, talk to the mortgage company and see if they’ll let you pay interest-only for a period, or take a break while you sort something out.

If you’re being paid directly into a joint account, arrange for the money to be paid elsewhere. If there are bills, rent or the mortgage coming out of the joint account, agree an alternative way of paying these, then tell the bank about the split. If you both have credit cards on one account, it makes sense to block them, so nobody can abuse the arrangements during the divorce.

Rebuild as soon as possible

If you’ve run up debts or spent your emergency savings during the divorce, paying them off and building 3-6 months’ worth of essential spending in an easy access account are the priorities. Don’t forget insurance too. If you’re relying on maintenance payments, you need to insure the life of the person paying them. After the split, you also need to revisit your pension arrangements, and work out how you can start building your retirement plans again.

As anyone who has been through a divorce will tell you, it’s never easy or cheap. However, these approaches should help protect you from the worst financial impacts, and who knows, a few years down the line you may start thinking of it as more of a blessing rather than a curse.

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