DIVORCE DOESN'T HAVE TO MEAN DEBT

Atlantic Financial Management offers tips for gaining control of your finances

Whether it was the strain of spending Christmas together or the desire for a new start, January is acknowledged to be the busiest month of the year for divorces*. According to the Office of National Statistics, divorce rates for 2010 increased for the first time in seven years. Worryingly divorce is one of the key reasons people find themselves in debt. Debt solution provider and DEMSA member, Atlantic Financial Management, believes that those facing new financial pressures as a result of a divorce should start a monthly budget plan and anticipate future payment shocks to help them gain control of their financial future.

"...primary reason for nearly 8% of clients getting into an unmanageable debt situation..."

Kevin Still, Director of Atlantic Financial Management says: "Divorce is identified as the primary reason for nearly 8% of clients getting into an unmanageable debt situation and starting a Debt Management Plan (DMP). Divorce is never easy, but planning stretched personal finances once you have come out of the other side can really help reduce concerns about the future and cope with any difficulties that come as a result of this period of monumental change. With a monthly budget plan in place, you can minimise the risk of debts spiralling out of control.

"Keeping track of what is due to be paid, and when, helps individuals put their true financial status in perspective. During a divorce there are new outgoings that have to be accounted for, such as maintenance fees, not to mention the fact that most bills used to be shared. The cost of the divorce proceedings alone average over £13,000, so, it is important to prioritise which debts need to be paid first and understand the potential consequences of not meeting these payments.

"Facing up to the grim truth is often the key to taking back control of your finances and perhaps your whole lifestyle."

"Once you have identified all your outgoings and income, you should be in a much stronger position to determine whether there is a serious gap in your finances. Equally important is to map out the timing of income and payments over the month to identify when your finances are at their most vulnerable and, therefore, may require careful cashflow planning.

"Dealing with joint financial obligations, including arrears and debts, can require professional advice, especially where these debts may not easily be split at the time of divorce. We help people set up new bank accounts and transfer direct debits and standing orders to their new account.

"Facing up to the grim truth is often the key to taking back control of your finances and perhaps your whole lifestyle."

ATLANTIC'S TIPS FOR A MONTHLY BUDGET PLAN

Income

Individuals need to thoroughly assess all their sources of income including any wages, salary, bonuses/commissions, tips, in order to work out a realistic budget. Other sources of income should also be included in calculations, such as:

• Part-time work by any family member at the household
• Income from renting out properties or sub-letting rooms in the house
• Any type of benefit including; working tax credits, child benefit, child maintenance, single parent benefits, job seeker's allowance
• Maternity pay, statutory sick pay or any other financial support they may be receiving

Outgoings

When thinking about monthly expenditure it is important to consider all weekly, monthly, quarterly and even annual outgoings, including:

• Household Expenditure -

  Rent, mortgage, garage or ground rent, National Insurance (for the self-employed), council tax, water rates, gas & electricity bills, telephone bill, any cable, satellite or internet subscriptions, TV licence, contents and buildings insurance, etc. It may be the case that you qualify for the single persons discount on council tax after separation.

• Travel Expenditure -

  Any petrol or diesel costs. Annual costs like car insurance, road tax, MOT and servicing also need to be accounted for – and for each car. Plus your budget should include costs of parking or public transport costs, like season tickets and rail cards.

• Child Care Costs -

  Child minding or nursery fees, school meals, travel to and from school, after school care and clubs. Don't forget to add child maintenance commitments.

• Health Costs -

  Any dental, optician, health insurance or other reasonable medical expenses.

• Leisure Costs -

  Any meals out, tobacco, alcohol, and hobbies etc.

• Housekeeping -

  Any clothing or food costs, making adequate allowances for less frequent purchases like school uniforms and shoes for the children.

• Financial Commitments and Loans –

  Any credit agreements, loans, credit card bills. Banking costs can be an important consideration and a new bank account is a probable outcome of separation where there was a joint account. It is probably sensible to look at key insurances (e.g. life insurance) as a result of the change in status and the beneficiaries.

The timing of outgoings should also be considered and discussed with creditors and banks etc. It may be possible to change these to better suit your monthly budgeting and other commitments.

To find out more about Atlantic Financial Management contact us or call 0845 0 30 30 30