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Splitting up without going broke

The breakdown of a marriage and a family is for many people the most emotionally and financially devastating period of their life.

Handling finances can be tricky at the best of times, but can be very difficult to manage when you're under duress and stress.

If you have both child and property (finance) issues to resolve, work on the child issues first because a) your children are more important than money, and b) if you sort out the money first you may have no incentive to provide the X to negotiate … either reasonably or at all.
The Courier-Mail
25 February 2008

Splitting up without going broke
By Rosanne Michie

- Marriage breakdowns cost the country $6b a year

- Australia has one of the highest divorce rates in the world

Celebrity divorcee Heather Mills might be laughing all the way to the bank but for those of us who aren't clutching a $120 million divorce settlement a family split can be a financial car wreck.

Anyone who has survived it will tell you that divorce registers highest on life's misery meter - way ahead of public speaking, loss of a job, moving house, even possibly more than a death of someone close.
The breakdown of a marriage and a family is for many people the most emotionally and financially devastating period of their life.

The really tricky thing is that it is so often a double whack - there are all these vital financial decisions to be made while you are dodging the emotional blows.

What happens through this period of the division of assets (or if you're really unlucky) the apportioning of debt, affects you and your family for the rest of your life.
And if there are children involved it can become even more of a financial basket case. No one usually wins in divorce but experts agree that a positive and realistic mindset can greatly minimise the loss.

Melbourne family law barrister Bruno Kiernan says the first step is to find a good family law solicitor who you are comfortable talking to. This might take a bit of shopping around. Talk to your friends and associates but always make your own decisions.

"Despite the enormous difficulties of actually doing this at the same time that people's emotions are so low you also must try to think commercially," Mr Kiernan says.

"The idea that 'I am going to make them pay' is a really bad one to take into a legal situation. Try not to use the settlement to exact revenge.

"But even while one party might have the attitude that they are going to be reasonable and work toward a workable outcome they can still get dragged into costly legal proceedings by the other party."

Mr Kiernan says this can cost up to $100,000 per person, so it is clearly best avoided.

If there are children from the union, parenting arrangements have to be agreed first as to how much time children spend with each parent affects both parents' ability to work and the size and cost of the home they will need to provide. This consequently affects the percentage of the split of the joint asset pool.

It's also prudent to get support from other practitioners for balance. Lawyers are legal experts, and counsellors are relationship experts, neither are financial experts.

For example, some people fight to keep their dream home, only to find they don't have the income necessary to pay the bills, so it quickly turns into a nightmare.

The Australian Government has made efforts to reign in the cost and social impact of divorce.

The Family Law Act and Rules have been amended to try and make it easier for separated couples to resolve their differences without the need for litigation.

Today, Family Law require parties to genuinely try to resolve their dispute before starting court action. Relationship Centres have been established across the country to help do this.

Get legal advice and research as much as possible but Mr Kiernan says from his experience the best financial outcomes are usually in situations where ex-spouses continue to talk.

"Do your homework but then try to sit down and negotiate through your financial and parenting issues and find the common ground. Collaborative law is where people agree to resolve their problems outside the legal system."

An exception to this would be where there are domestic violence issues or a serious power imbalance.

It's also important to make a will to cover the financial and guardianship issues both throughout the process and after a Binding Financial Settlement has been agreed.

"I think the best message is for people to think commercially but don't be greedy," said Mr Kiernan.

The top five money mistakes separated couples make

Unfortunately, separating from your spouse often means separating from your house.

Sharon Hague from Aussie Money Coach, which specialises in "post-marriage" rebuilding, cautions us to avoid these common money mistakes.
1. Emotional Spending

Whenever we are hurting it is tempting to turn to physical things to heal emotional pain.

While it feels damn good for a short time, the high doesn't last and inevitably makes make finances worse.

Limit luxuries but if you can afford it, allow for a massage or something for the soul occasionally.
2. Financial Surrender

Be involved in all financial decisions. Don't be a doormat. If you hear yourself saying 'I don't care about the money, I just want out', stop.

Women in particular, Ms Hague says, will often channel their energy into one goal, like keeping custody of the children, and lose sight of the financial considerations.
3. Guerilla Warfare

Don't allow your life to become a scene from The War Of The Roses. Revenge might be sweet but moving on with your life in a healthy and solvent way is much sweeter.

And if the thought of poor manners or emotional trauma doesn't scare you, remember that war is extremely expensive.
4. Choosing Advisers

Couples need a separate accountant as well as separate legal counsel. It also pays to shop around but beware of fancy deals.

Andrew Ferguson, of MJ Consulting, cautions: "There is a huge conflict of interest in acting for both spouses when they are going through a divorce, even where the split is an amicable one."
5. Major Change

This is a hard one when you are feeling so unsettled but resist temptation and postpone major decisions for at least 12 months after separation.

The first birthday, anniversary, Christmas and so on can be really rough roller coasters of emotion.

Work to create a wealthy future for yourself by investing some money in your dreams.

But try to allow your balance to build up or keep your debt stable and your brain to bounce back before you actually take the plunge on major changes.
Top tips for taking financial control

In most marriages one spouse manages the finances, which, both during the division of assets and after a spilt, can leave the other unprepared.

Create a budget
 
A budget serves two purposes. It gives you a realistic assessment of how much money you need to survive on a day-to-day basis.  Make it as detailed as possible.

A budget is also a powerful tool to give to your lawyer if you are in the midst of a split, or to use as you enter the moving-on stage.

Learn what you've got

You'd be surprised how many spouses don't know the full extent of their joint assets.

The list of what you own often extends way beyond your car, house, and furniture. It could also include superannuation, family business, retirement plans, and certain employer benefits and bank accounts for both yourself and your spouse.

If your situation is complicated, consider hiring a professional to help.

Angela Brown, a financial planner with Genesys Wealth Advisors, warns separating clients to be wary of others hiding or removing large sums of money, especially with the growth of Self Managed Superannuation Funds (DIY Super).

Protect your credit rating

People's credit ratings are regularly destroyed during divorce. It's vital to take ownership of your credit situation early on.

Remember, if you and your soon-to-be ex (STBX) have joint debt, such as credit card bills or a mortgage, your credit ratings are inextricably linked.

So it's essential to identify all joint debt, either close the accounts or freeze them, and keep payments current to the best of your ability.

If your credit score slips, your borrowing costs will go up and this will be money out of your pocket for years to come.

Helpful resources

The Family Relationship Advice Line is a national phone service assisting families affected by relationship or separation issues. Freecall 1800 050 321.

The Federal Magistrate Court http://www.fmc.gov.au/ (or better still http://www.familycourt.gov.au/)- 80 per cent of the court's workload is in the area of family law and it's an excellent first step.

The Family Court of Australia offers a File Search service which allows clients and their lawyers to access information about their family law matters online. Go to the Family Law Courts website or ring the National Enquiry Centre on 1300 352 000.

Dads on the Air - News for fathers.

I Don't - Australia's divorce directory.

Aussie Divorce - offers an online case assessment by an independent family court barrister.
The stats:

- Marriage breakdown costs the nation up to $6 billion each year.

- Australia has one of the highest divorce rates in the world. The Australian Bureau of Statistics says that 53,100 divorces were granted in 2003, an increase of 10 per cent on 10 years earlier.

- The median age of divorce for men was 42.6 years and 39.9 years for women.

- The median time from marriage to separation was 8.7 years and 12.2 years from marriage to divorce. Half of all divorces involve dependent children.

- One in five marriages end in divorce within five years, and more than one in three end within 20 years, according to an AMP.NATSEM report.

- Men are more likely to end up in a childless home, while women are more likely to be sole parents.

- A year after divorce the disposable income for men fell by $4100, while for women it plunged $21,400, according to HILDA (Household Income and Labour Dynamics in Australia).
Good advice dad4life.

I did not have to deal with children but trying to sort out the property settlement has cost me just under $10,000 in legal fees to date and once everything has been finalised maybe about $12,000 and for what, to have a settlement almost the same as what we first agreed apon before lawyers were involved.  

I do not know how much my X has paid, all I can assume is that it would be close to what I have paid for my lawyers and also the added cost of a barrister represent her on two occassions so a figure for my X may be closer to $15,000.  I think the X found a lawyer who said that she would come out of the settlement a lot better than what she did.

In all close to $30,000 in the legal professions pockets instead of our own.

Wouldn't it be good if there was an indipendant (Government, we pay taxes) body that can sit down with the parties and go through everything and advise of the likely out come of the proceedings before the legal profession became involved.

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