It might be smooth sailing now, but sometimes, things fall apart. How will a roadblock in your personal life affect your business?
Remember the song, ‘Breaking up is hard to do’? Those who have been through relationship breakups I am sure will agree that it is not easy and there are lots of both emotional and financial issues processes to go through.
Generally, it is the emotional side that kicks in first, the hurt, anger, grief and so on, and if there are children involved then there is a whole other layer of emotional complexity. But at some point through this process the financial aspects of breaking up have to be dealt with, both in terms of the splitting of assets and debt, and the day to day financial management of who is going to pay the bills and how.
Logic tells us that when one household splits into two, expenses are going to go up (there are now two households to maintain instead of one). Income will either stay the same, or possibly go down significantly for one partner or the other.
This concept needs to be understood very early on in the breakup. Too often I am seeing clients who have separated and continue to try and maintain the same lifestyle they had before, and are now getting themselves further into debt to do so. The rationalisation tends to be “when we sell the house I will be able to repay the debt”. Or, “ the issue is just too hard to deal with right now”.
This is a huge concern. It may have taken years to build up the equity in a house/business and a matter of months to spend it on lifestyle. Once that capital is gone, it can be very difficult to get it back. Getting good advice both legal and financial is crucial and certainly sooner rather than later.
During the emotional rollercoaster, the last thing you want to have to think about is doing a budget! But like it or not, it needs to be very high up on the list. When you go and see a lawyer, one of the first questions they will ask is; what are your financial means? What do you own? What do you owe?
Start preparing this information as soon as you can. Look at your income, what you are spending, where you can cut back and what property you can keep and what will need to be sold. Understanding your financial position will enable you to make sound, well informed decisions when everything is being resolved.
It is not only your own financial circumstances that you need to think about but also how you would cope if your spouse decided to make a claim for spousal maintenance?
What about the impact on your business…… This is a whole different kettle of fish.
I have worked with couples who ended up with debts at the end of the relationship, and others who want to keep their family home but don’t have the means to support it (and don’t realise that until it is too late), and others who have understood their position and made sound decisions and have come out the other end stronger both emotionally and financially.
The key here is, don’t wait until you are breaking up to look at your personal financial position, do it now!
Some food for thought:
How would you fare if your domestic bliss was shattered?
Do you have a handle on how much you spend a week on household and personal expenses?
Do you have contingencies in place for your business if you do find yourself in a break up?