- Date : 16/11/2018
- Read: 4 mins
This is the story of a woman who took stock of her finances while she was facing a divorce.
Not all marriages are meant to last forever. Getting a divorce is an emotional drain on both spouses, but for a woman, it comes with an additional social stigma. If there’s a child involved it gets even worse as the child too must undergo the trauma of separation.
Ironically, preparing for divorce can involve as much work as getting married. It’s not just the mental fortitude required to begin life afresh as a single woman. It can also be a financially taxing time, especially if you didn’t pay much attention to your finances earlier. I, for one, realised the importance of setting financial goals post my divorce and learned to invest with these changed priorities in mind.
It seemed a tall task then, but luckily, I had a friend – a lawyer by profession – who had the wisdom to advise me to remain calm while helping me secure my financial future. Here’s how I went about it.
Taking stock of assets and liabilities
When you build a home together for a good ten years, you build assets for the long term with the idea that you will remain together for the rest of your life. However, during a divorce, emotions run high and there’s often an unequal distribution of assets. More often than not it’s women who are short-changed because they tend to leave important financial decisions to their spouses. My case was no different.
My best friend suggested we opt for professional help from a chartered accountant to find out exactly how much money we had in savings, how much of it was invested, and how much cash we had in hand. We made the same assessment for the debt we had accrued in getting a joint home loan and a car.
While all our investments and cash were divided equally, we decided that a separate child care account should be created in the name of our son, towards which my ex-husband would contribute Rs 50,000 per month as childcare expenses. For all the previous investments – mutual fund SIPs and healthcare policies – that were already made for our son, an irrevocable trust was created with him as the beneficiary. This was to ensure that both of us continued to make uninterrupted investments for the stipulated time period as per the investment schedule. While my ex-husband’s share of childcare expenses amounted to Rs 50,000, I made a commitment of Rs 50,000 per month towards the trust that was made essentially to secure our son’s financial future.
Since we had a joint home loan, we decided that he would continue to pay his share of the loan while I continued to stay in the same house after the divorce. While he agreed to this, I did not stake any claim to the car. Further, I relinquished rights on the second investment home of which I was a co-owner.
Documentation is key
Once we arrived at an understanding, my friend drew my attention to the fact that everything – from sharing of assets and liabilities to parental responsibilities – needed to be put in black-and-white. Our CA helped formulate these documents, which were then vetted by my friend on my behalf, and my ex-husband’s lawyers on his.
Our lawyers also suggested that we explicitly state the remedies, in case either of us failed to meet the financial commitments we had made in our divorce agreement. Our tax records for the last five years were also kept as a backup to answer any additional queries that could come up during the divorce proceedings. Both of us kept photocopies of all these documents, just in case.
Drawing up a new financial plan
Keeping my new status in mind my friend insisted that I opt for professional financial advice, especially since my ex-husband used to look after the finances on my behalf.
Acting on her advice, I sought help from a financial planner who helped me draw up a new financial plan and allocate assets accordingly. I invested in a long-term SIP in a diversified equity fund dedicated towards retirement. I also enhanced my health insurance cover, adding critical care insurance and accidental insurance to my insurance portfolio. I also set up a separate auto debit account to contribute to a trust created for my son – to invest in a child plan that would financially support his higher education.
My divorce taught me the importance of reassessing my financial situation under the changed circumstances. Thanks to the financial planning exercise I undertook during my divorce proceedings, I felt more confident and in charge of my future.