What We Saw and Family Law
I recently saw a short article in the Globe & Mail about the changing divorce rate in Canada.
The article had another fascinating piece of information:
Divorce divides marital assets in half (in theory at least), whereas living costs fall by just 30 per cent or so.
That number seems to align with our anecdotal understanding of the re-organization of the family’s finances after a separation.
Separated couples often move from one household with two incomes to two households with two incomes (or one household with one income to two households with one income). Although your income and assets are generally speaking split in half after separation, your costs of living are not simply split in half. Put another way, your post-separation expenses do not suddenly become 50% of your pre-separation expenses. This article suggests there is about a 20% discrepancy, which must resonate with most separated parties.
Think about it, when you and your partner separate and each live in separate residences, those residences each have hydro costs, cable/internet costs, rent/mortgage costs, etc. There is a built-in redundancy there that each person has to stomach as part of a separation. This is one of many reasons why separation can be so financially stressful (see also Five Things About Divorce that Suck and how Collaborative Law Makes it Easier).
To me, this underscores the importance of financial literacy—an often-overlooked component of a separation—especially early on when emotional reactions are usually at their highest.
At EFL, we recently held a financial literacy seminar for a number of our clients. The information provided, by a qualified chartered accountant (CA), was insightful and comforting for those who attended.
In addition to accountants, financial advisors can also provide guidance post-separation to help shape the re-organization of your day-to-day financial life.
At minimum though, a monthly budget sheet is useful in determining which expenses can be trimmed, where money can be found, and just generally where your money is being allocated (which is sometimes far different than you imagine that it is). If you’d like that spreadsheet, please email us at EFL and we would be happy to provide you with one.
Richard Pollock
If you have questions about this post, contact me today at [email protected].