When your long-term relationship fails, the last thing you want to think about is money. But it’s the best time to have a deep think about your short-term budgeting needs and your long-term financial goals – because they will likely need to be readjusted.
Dividing your finances during a breakup can be complicated by the fact that one partner is usually more financially savvy than the other.
Indeed, it is often the case that one spouse is "in charge" of the finances and has a full picture of income, costs, debts and savings. While the other is in the dark (usually by choice!). If you’re not very interested in finances to begin with, it can be tempting to take a backseat and let your spouse take charge. But when it comes to ending your long-term relationship, it pays off to be the 'spread-sheet partner'.
If we look strictly at traditional male/female long-term commitments, 58% of women leave the finances to their spouse according to a recent UBS Global Wealth Management study. And lacking this oversight into their family finances, women are therefore still more likely to be hit financially when their long-term relationship ends. Research from the London School of Economics found that divorced women’s income dipped by 20%, while men saw an average 30% increase.
There are many factors at work, of course: women are usually younger than their male spouse, have more care responsibilities and tend to work fewer hours outside of the home. But knowledge is power, and if you know how much your family spends on what, this better grasp on finances will come in handy when you have to go it alone. Regardless of who works, who earns (more) money, and who makes purchasing decisions – and whether or not your relationship is on the rocks! - you can take an active role in your family finances, today.
Same-sex couples face different problems when separating. Many have been together, and had joint finances, for years (even decades!) before they got married. All the while courtrooms will only divide assets that were accumulated during the marriage.
To even out the proverbial playing field, you can start to have conversations with your partner about who is bringing in what and create a simple budget together – you can download a budget template from the internet. Try to pin down your costs, how you are saving for retirement, what your current savings account looks like and whether you need to adjust your spending. Do the math on what your financial picture would look like in 20 years, if you stick to your current pattern. It also never hurts to have a separate, personal savings account.
Although everyone is optimistic when they decide to commit to their partner, it doesn’t hurt to run through a worst-case scenario from time to time. If you were to separate, what would happen to your pension? Would you be able to pay for your home or car? Who will take care of the children – and who will pay into their college funds? Would you support your spouse financially, or expect to receive assistance yourself? And those are only the most common financial items to worry about.
In short, everyone wants their committed relationship to work out and live happily ever after. And in truth, the divorce rate has been falling for years! But when the time comes to go your separate ways, your knowledge about your financial situation could pay off, big time.
You are unique and the same applies to every relationship. Aegon recommends that you seek professional financial advice for your current situation and your plans for the future.