Divorce & Women: 5 mistakes to avoid

In this edited extract from her book, financial adviser Helen Baker reveals the five divorce mistakes she says women cannot afford to make.

No matter which side of the fence you’re on, divorce (or a de facto split) is difficult: no one wins. How do two people whose hearts flip-flopped when they even thought of each other get to a point where they can no longer stand the sight of each other? It happens too often.

For your own sanity, I recommend you deal with the fallout of the split as quickly as you can to regain peace of mind that will only be robbed by prolonged angst, stress and anxiety. I said ‘quickly’. I didn’t say ‘rashly’. It’s a confusing time. Working out what is in your best interests is not always easy. Women often agree to a settlement of taking the family home, leaving other investments behind. That’s not necessarily the best (smartest) thing to do.

Here are five divorce mistakes you cannot afford to make.

1. Thinking your lawyer has all the answers

One of the biggest mistakes people tend to make is to rely on a lawyer for all aspects of divorce. Yes, you may need to see a lawyer, regardless of whether children are involved, because they know the law and will guide you through any legal issues that need dealing with. They are great at legally drafting what you need to close your property settlement and your divorce and can advise you on likely entitlements under the Family Law Act. Lawyers are not, however, authorised to give financial advice.

You need a licensed financial adviser, ideally with divorce planning expertise, who has the skills and insight to scope your goals and values (for now and the future) and assess the assets that would help you achieve those goals, and who can provide detailed realistic options and easy-to-understand calculations of what an asset split could look like and mean for you. Professional financial advice also takes any recourse off the lawyer over money matters and assets.

2. Believing you’re ‘not entitled’

Early in the discovery process, we identify exactly what assets are ‘up for grabs’. This may include property, investments, shares (including shares in the spouse’s private company), superannuation, cash, certain trusts – anything that has value or potential value. And it does not matter whose name it is in. Do not fall for the “I’ve worked while you’ve stayed home so you’re not entitled” or “This is my superannuation”.

3. Simply focusing on keeping the house

Women particularly have an emotional attachment to the family home, particularly when children are involved. As a result, it’s common to see women keep the family home, leaving all other assets to the husband. This is not always a good option. Here are a few reasons why:

• The upkeep of a large home can be a financial drain. Can you comfortably afford all those costs on your own earnings? If you’re relying on your ex for outstanding mortgage repayments, what happens if he loses his job or defaults on payments?
• If all your money is going into the home, there’s little left for extras you deserve – such as family holidays – or little luxuries that promote self-care (such as a relaxation massage or a new pair of shoes).
• Staying put so as to keep the children ‘stable’ is commendable; staying put to keep up appearances is not. Children are likely to be more resilient than you think.
• Children do grow up and leave home. Without other investments, you may have to sell the family home to fund your future. Is downsizing an option for you, providing some surplus funds for investments? That’s a tough question only you can answer. Most people I’ve seen want to stay where they are or maintain their standard of living. Something has to give.
• Some women cannot see the value in their ex-husband’s superannuation or its tax-effectiveness, so they leave him with a pot of gold come retirement time.

You may be tempted to think, I’ll sell the house and rent instead: then I’ll have money and I won’t have to worry about rates, maintenance, or home insurance. That’s true but what about the long term? Once you are out of the property market, it can be difficult to buy back in. And I’ll raise that issue of security again – a landlord could kick you out. It may be worth buying something a little smaller, a little further afield.

4. Wanting your day in court

You’re really hurt and pinged off with Dearly Ex-Beloved and you want to hear the judge beat down on the other side and say how bad he was. You want your day in court. Surprisingly, the judge might not see the situation your way. It generally takes a very long time and the cost associated with this risk can be seriously damaging.

Sometimes it is better to know in your heart that you were right and settle and move on. Imagine the potential growth that you could have earned over two to three years on the investments that you’ve settled on, rather than waiting for your day in court, forgoing that growth, and having to suffer legal fees, stress and torment.

5. Thinking you were just sleepover buddies and he has no claim on you

You may be a woman with considerable assets. You may have a friend who sleeps over regularly, what you smilingly think of as “a close friend with benefits”. When do sleep buddies become de facto? That’s an increasingly grey area, legally. You need to be aware of it. You may well be in a de facto relationship without even living together. And that means your assets may be up for grabs.

A final word

When it comes to getting a divorce it’s important to be clear in your goals. Understand the pros and cons before you sign on the bottom line. Remember, you can’s buy peace – they don’t sell it in a shop. There’s no point fighting over something you don’t want or that doesn’t work for you. The stresses of divorce – the fighting and anxiety – can result in long-term damage that costs more than making wise decisions.

Cover image source: Denis Raev/Shutterstock.com.

About Helen Baker

Helen Baker is a licensed Australian financial adviser with a Masters in Financial Planning. She is the founder of On Your Own Two Feet and the author of several books.