What divorce experts want you to know about your personal finances in the case of a split

For this week’s Reality Cheque, we’re looking at the realities of separating finances when couples split.

In Strangers: A Memoir of Marriage, one of the buzziest memoirs of the year, Belle Burden writes about being blindsided by her husband’s out-of-the-blue desire to divorce. The more shocking plot points revolve not around his affair, but around their personal finances. Burden, an heiress and attorney, reveals that she ceded control of the household’s money matters to her husband, a choice that left her imperilled—stressing about losing homes she bought—post-split.

“I paid our bills online and signed our tax returns, but slowly I lost touch with both the big picture and the details of our financial life, depending on James to tell me what to do. I felt some shame about it, about not being involved, about not asking questions,” she writes. “But I was afraid I wouldn’t understand it, that it was too complicated for me, even though I was a former corporate lawyer. I settled into the vagueness, the luxury and privilege of not knowing.”

The memoir, soon to be a Netflix movie adaptation starring Gwyneth Paltrow, has become a pop-culture phenomenon, and a wake-up call for happily marrieds who think this could never happen to them.

In Canada, roughly 38% to 40% of marriages are projected to end in divorce before the 50th wedding anniversary, estimates Statistics Canada.

Here’s what to do in the case of a split, according to three divorce experts.

Channel the energy of a sensible CEO

Whether the breakup is mutual or not, a mess of emotions is totally normal. But try to shift your mindset: “This really is a business negotiation. We’re going to be unbundling the business part of your marriage,” explains Eva Sachs, Toronto-based certified financial planner and founder of Eva Sachs Divorce Financial Consulting.

“We try to say, OK, leave the emotion aside. This is the pragmatic part. This is just the numbers,” says Sachs, who is also a Chartered Financial Divorce Specialist (CFDS) and Certified Divorce Financial Analyst (CDFA).

Learn the basics of personal finance—even when it’s inconvenient

When you’re on an emotional roller coaster, it can seem like the worst time to start studying this stuff, but it’s essential. Otherwise, you could wind up at a lawyers’ meeting feeling like an outsider, watching decisions being made about your life and not grasping the implications.

“With some clients, we start by giving them a bit of a financial education,” says Sharon Numerow, Calgary-based certified divorce financial analyst and founder of Alberta Divorce Finances. For starters, look at what your family has in assets and debts, and understand what would happen if you sell those assets.

Gather as much personal financial information as you can

If you have an inkling that you may be heading toward divorce, collect this information while it’s still readily accessible to you, advises Numerow. Make a list of everything you both own and owe, and calculate your net worth, so you know what assets and debts you will have to sort out. Don’t skip this step.

“Otherwise, you’re basically waiting for the other person to provide all the disclosure,” she explains. Depending on the circumstances and where you live, family law may require full financial disclosure—including income, assets and debts—during the separation process.

And in the vast majority of cases, no one’s hiding money, Numerow says. But if your ex is being sneaky and dishonest, it can be difficult to know later.

Do the boring thing: Make a budget

Out of all her clients, Numerow estimates that 15% to 20% are meticulously organized financial people.

The rest? “They’ve never done a budget.” But separating a household into two inevitably means lifestyle adjustments. And if you don’t know what life is costing you now, you have no way to figure out what life’s going to cost you when you have less money.

That means you can’t know if you’ll be financially okay. Begin by sitting down with your credit card and bank statements, and see how you’ve been spending. (Find out if a budget template is worth paying for.)

---

From our sponsor

---

Speaking of budget, plan for legal counsel

“It’s important that both partners have their own independent lawyer,” says Lisa Gelman, Toronto-based senior lawyer and owner of the family law firm Gelman & Associates.

“If you can’t afford one, it could become a problem with respect to an imbalance of power.”

The cost will vary according to the complexity of your situation, and whether the process is semi-amicable or combative. A simple separation agreement might be a few thousand dollars, while going to court could cost tens of thousands of dollars. As a first step, lawyers will typically offer a complimentary consultation.

Assess if staying in the family home is genuinely affordable

Are you absolutely set on keeping your dream home (and the giant mortgage) at all costs? Don’t negotiate for it before you understand your finances, says Sachs.

She also encourages people to think about their motivations. Do you want the house because it’s in a good school catchment area for your kids? If you can’t afford it forever, could you afford it for a period of time? In situations like this, Sachs will try to do financial forecasting to see if it’s possible to hold onto a house for a few years, until the kids finish school.

Understand what you can do with a joint account

It’s common to need your own funds from your joint account for a new place to live, for example. “If there’s a joint account, there’s nothing wrong with you taking half that amount out and letting the other side know,” says Gelman, adding that all finances will need to be accounted for during the separation process.

Before making any withdrawals, connect with your lawyer for guidance, and for transparency’s sake, communicate what you’re doing to your ex, too.

Enlist a team of experts

“Traditionally, the first call you’d make is to a lawyer. Well, that’s not necessarily the best choice,” says Sachs. Instead, depending on your circumstances, you might first ring a real estate agent to get a sense of your home’s value or talk to your HR department to understand your pension or what will happen to your benefits.

Or if you have kids, you might call in a family therapist or counsellor who can provide dedicated support. And of course there are money experts, including divorce financial analysts, trained to provide guidance for this exact moment in your life.

Read more from this issue of The Get:

1. Paycheque deductions decoded: How to read a pay stub
2. Interior Designer Tommy Smythe on buying a good home
3. The best apps for school that post-secondary students swear by
4. How to stretch your paycheque, improve credit and avoid payday loans