Financial impact of divorce – a woman’s perspective

Although there isn’t any research specifically for South Africa, our divorce rates mimic most of the western world, so much of the research done elsewhere is likely to apply here. In twin studies done by Jeffrey Dew and Sonya Britt for the ‘Development of National Marriage project (USA) have come up with some great stats and indicators – but they make depressing reading. If a couple argues more than once a week about finances, they are 30% more likely to divorce. Those arguments are usually longer and more intense. Money arguments is more important than any other ‘hot topic’ including in-laws, children, chores etc. Financial strain often coincides with having children, and can trigger severe marital strain. Higher net worth individuals are also more likely to divorce.

‘Money can’t buy you love, but it can buy you independence’. The best thing a woman can do, throughout her life, is to make sure she always has that independence. There are a number of steps to achieve this:

• Before you marry, spend some time with a financial coach that can ‘mediate’ a discussion between the two of you to find your basic beliefs on the ‘use’ of money, and determine how similar your ‘wealth’ values are. If one of you is ‘materialistic’ (nasty word I know, but we’re talking straight here) and the other not – there are going to be problems. If both of you are inclined to spend more money than you earn and use credit liberally, then your long term wealth is going to be severely impacted. Start a marriage, or co-habitation agreement with good financial habits, even if you have to postpone it while one or both of you get help in developing those habits.
• Get a very clear understanding of each other’s financial responsibilities to the household. Are you going to have children? Is someone going to become a stay-at-home parent, if so, who. When will they go back to work, if ever? What impact is this going to have their careers? Can this be addressed in an ante-nuptial contract? Alimony is rarely paid anymore, the home-maker might get a couple of months ‘restorative’ payments, but that’s it. At very least the working spouse should continue to pay into the other spouse’s retirement fund. It is those home-makers that have stayed at home for many years, decades even, without updating their skills that are hardest hit in a divorce. Seriously reconsider if one of you opts to be a full-time homemaker. If you are determined to follow this route, look at starting a business from home, get a university degree, keep your skills sharp. Today it is easier than ever to run a business from home. Major assets should be in both your names.
• Never abdicate the responsibility for your finances to your spouse. Do your own taxes, have you own life policies, investments and retirement funds. If you have the same financial advisor, make sure you’re included in all meetings. If the advisor is talking above your head, find your own. If either of you are previously married with children from a different partner, I strongly recommend you take out life policies on each other, not in your own name. If you ‘own’ the policy the beneficiaries cannot be changed. If the policy is in your own hands, not owned by another person, like your spouse, they can change the beneficiary in 30 seconds and you will be none the wiser. Change your will as soon as you decide to divorce. If you don’t, you have a 3 month ‘grace’ period, after that whatever you have in your old will is going to stand. One of my male clients – a lawyer no less – still had his ex-wife as the beneficiary on his R7m life policy despite remarrying and having a child. Because a life policy is a contract with the third party on your death, whoever is nominated in the policy will get the proceeds, irrespective of what the will says. Fortunately that ‘oversight’ took 30 seconds to correct.
• How you get married is vitally important. Don’t be a cheapskate, get an ante-nuptial contract (after you have had that talk with your financial coach). Community of Property is a really bad idea. It is not just the community of property, it is the community of losses too. In other words if your partner has a hair-brained business venture that goes bust you can lose the entire family estate, not just his share.
• Get clued up on personal finance. Being clueless is a short-cut to coming off second best in a divorce (and an easy mark for all sorts of conmen). Don’t just go along with your spouse’s decisions. If you’re moving house every 5 years, find out exactly the financial impact – the transfer duty, agent’s commission, bond registration, conveyancing fees can add up to hundreds of thousands that you’ll never make back.

Author: Dawn Ridler CFP ®, MBA, BSc Hons, dawn@kerenga.com, www.kerenga.com.