Women and Divorce: How to avoid 4 common financial mistakes

For women going through a divorce, careful planning is crucial to protect your future financial security. Discover four common financial mistakes to avoid.

Going through a divorce can be an emotional and challenging experience.

As such, keeping track of all the administrative and financial consequences associated with this significant lifestyle change might feel overwhelming. 

However, paying close attention to the financial aspects of your divorce could be essential for protecting your future wealth, especially for women. A report published by the Guardian has revealed that women are losing out financially due to a rise in “DIY” divorces, tending to end up worse off than their male counterparts afterwards.

So, if you want to protect your future financial security, read on to discover four common financial mistakes to avoid during your divorce.

1. Making emotionally driven decisions

Divorce can disrupt all aspects of your life, from where you live to how you socialise. It’s a form of loss. So, it’s no surprise that going through a divorce may lead you to make emotionally driven choices.

Indeed, it might be hard to set your feelings aside and think objectively about your finances.

Taking a step back and logically assessing the facts could help you achieve a fair settlement and work towards your long-term financial wellbeing. On the other hand, going through with emotionally driven decisions could potentially make it harder for you to build the life you want after your divorce and in later life.

For example, you might be eager to keep your marital or family home at all costs because of the memories it holds. While this might feel instinctively right at the time, it’s important to review the situation objectively.

Taking on a mortgage or maintenance costs alone that you previously shared with a spouse could affect your lifestyle as well as your long-term financial plan.

What’s more, if you keep your home in exchange for relinquishing another asset, such as your pension, it’s worth checking that this is a fair arrangement.

As a financial planner, I can act as an objective sounding board and help you avoid emotional decisions. I can also review the short-, medium-, and long-term implications of any financial agreements you come to during your divorce.

2.  Not agreeing on a pension sharing arrangement

Although a pension is often one of the most valuable assets a person holds, Professional Adviser has revealed that only 12% of divorces include a Pension Sharing Order (PSO).

Unfortunately, failing to agree on a pension sharing arrangement could be particularly detrimental to women.

According to research by Legal & General, the average UK pension pot for men and women over 50 stands at £84,205 and £39,654 respectively.

This gender pension gap may be due in part to the fact that women are more likely to take time out of paid employment to care for children or other family members. This can affect the total amount in pension contributions a woman makes during her lifetime as well as limiting her earning potential long-term.

So, including a pension sharing agreement in your divorce settlement may ensure that you can continue saving for a comfortable retirement. A financial planner can help you explore the pension sharing options available and understand which is right for you.

3. Underestimating your financial needs

If your partner has previously managed your assets, or if you’re used to planning your finances as a couple, it may be difficult to accurately assess your financial needs after a divorce.

However, underestimating your financial needs could result in a settlement that makes it harder for you to live the lifestyle you desire both now and in later life.

If you’re going through a divorce, it’s important to consider both your short-term and long-term financial security.

For example, if your partner plans to continue working full-time while you assume primary responsibility for childcare, you might expect ongoing financial support. However, it’s also crucial to account for the potential knock-on effect that this arrangement could have on your financial stability in the future, such as your pension savings and retirement lifestyle.  

Understanding your new financial situation and how it could affect your future might feel overwhelming at this difficult time.

So, you may benefit from working with a financial planner who has the expertise and resources to provide a clear picture of your financial needs both now and in later life.

4. Delaying seeking financial advice

A common financial mistake you could make during your divorce is waiting until after a settlement is finalised to seek financial advice.

Indeed, PensionsAge has reported that only 7% of divorcing women seek independent financial advice. Yet by seeking advice early in the divorce process, I can help you gain an accurate assessment of the assets you hold as a couple, which is crucial for achieving a fair settlement.

Indeed, the Standard has reported that a quarter of women did not know whether their spouse had a private pension, and 77% were unaware of the value of it.

A financial planner can ensure that nothing is overlooked so that your financial settlement is appropriate for your current circumstances and future goals. After the divorce is finalised, I can then assist you in forming a robust financial plan that helps you start this next chapter with confidence and peace of mind.

Get in touch

If you want to explore how I can help you keep your financial plan on track both during and after your divorce, please get in touch.

Email lottie@truefinancialdesign.co.uk or call 07824 554288.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  

Workplace pensions are regulated by The Pension Regulator.