In brief: money before divorce - getting organised

Molly Haylett 0:00 The first thing is get it all out of your head and onto paper. I often say to people that before you can even think about what you're going to do in terms of how you might like to come to an agreement or splitting assets, the best way to side is just having a clear picture. Because when it's all in your head and you're not quite sure what it all means, it's really hard to actually then think ahead and get to a point where you can make decisions. Kate Daly 0:27 Welcome to The Divorce Podcast, where we explore relationship separation and parenting apart. If your relationship has ended or someone close to you is going through it, this podcast is for you. I'm Kate Daly, a relationship counsellor, divorce expert, and co-founder of amicable, a legal service helping couples navigate relationship change. Each episode looks at separation from a different angle, emotional, legal, or social, and with experts and special guests who share their own stories and tips to help people separate in a kinder, better way. This week I'm delighted to be joined by Molly Haylett, Chartered Financial Planner at Octopus Money. And she's going to share some tips on how to get ahead of the financial planning at the very start of the divorce process. Now, this is the first in our three-part series with Molly. So make sure you're following and catch up with the next two. The money tips for the middle of your divorce and after your divorce is finalized. This episode and our mini-series with Molly is created in partnership with Octopus Money. We discuss general information only and it doesn't constitute regulated financial advice. The tips we discuss are not personalised recommendations. So please do get in touch with an authorised advisor who knows your personal situation before making any financial decisions. Welcome Molly. Hello, thank you so much for having me. It's lovely to see you. Thank you for joining us. So, Molly, we're going to talk all things divorce and finances today. And I guess most people probably get that when you get divorced, it's not just a question of ending the legal marriage, but actually the bigger part of what most people worry about is how to split money and property. And so these decisions obviously can have a huge impact, not just on the immediate term, but your long-term future as well. So, given that, given that it's such a big opportunity and it shapes potentially the rest of your life, what should people start to think about when they're looking at divorce and thinking about how to divide up money and property? Molly Haylett 2:47 That's a really good question. Something that I'm asked an awful lot as well. And I often say to people that before you can even think about what you're going to do in terms of how you might like to come to an agreement or splitting assets, the best place to side is just having a clear picture. Because when it's all in your head and you're not quite sure what it all means, it's really hard to actually then think ahead and get to a point where you can make decisions and you're in that right frame of mind to think about decisions. So the first thing is get it all out of your head and onto paper and actually get clarity on exactly what you've what you've got. So what kind of pots are you looking at? Um everything that you know about yourself and what you've got. So things like what's coming in and what's going out. So that's the kind of income and what you're spending. But then also what have you got? So property, uh, you know, pensions, for example, any ISES, any cash accounts, you know, what do you have as well in terms of pots of money? And then what are your liabilities? So mortgages, debts, things like that. And then also what you think. So with with pensions in particular, quite lots of lots of people at the beginning don't really know exactly what they've got. They might get a statement that turns up every every year that they glance at, but or even some statements that have just gone missing as you, you know, moved house. So they'll know that they've got something from an old job somewhere else many years ago. But quite infrequently, do people know exactly what they've got and where it is? So I always say, do like a do a what do you think you've got as well? And then that gives you an idea of what you need to explore and look into a little bit as well. And then also, what don't you know? So, what do you need to find out? And that might be, you know, what your spouse has or things about your own financial picture that might be long forgotten. So, first step, just get clear on what's there. Kate Daly 4:27 So it's kind of like without wanting to make it sound too big and scary, because there are lots of ways to do shortcuts which we can come on to, but you're basically saying a full financial audit of what you've got, what you've actually got, and what you think is missing. Molly Haylett 4:43 Yeah, absolutely. And that just brings the clarity. That's like one of the most difficult parts is there's all of these question marks and there's all of these terms that you're not quite sure on. So before you can even think about like what's going to happen with all of that, actually understanding like what do I have already? Where am I coming to this from? What's the baseline? Um, and you know, keep it simple, like grab a highlighter and sort of start to highlight and segment things. So, and I always say do it on paper, not online. And I that's kind of different for everyone, but I think getting it out of like writing it down and having it in front of you on paper, grab a highlighter, segment, you know, what counts as like income for now. So, like what's my income, my salary, you know, what's cash have I got, what's a pension, what belongs to me, what doesn't, you know, and then you it that will help by just setting the baseline to begin with. Kate Daly 5:34 And I think it's not just a good housekeeping thing to do, but when you actually move through the process of divorce, one of the things you have to do is what's called a full financial disclosure. So all of this basic build-up work is super helpful because it's going to make that next part of the official process that bit easier if you've already got that information to hand. And I think it's a super point you make because again, you know, my experience from talking to people day in, day out about this, very often you have these conversations around the ending of the relationship. And before you've almost even had the, I'm really sorry, I know this isn't necessarily what you want, but for me, this is over conversation. You're already jumping into what's going to happen with the house and who's getting what, and money and figures start getting banded around. And I just think that can be so unhelpful. So if you can just separate those things and like you say, just do a bit of prep work, just for yourself at this point, know what you've got, what's enjoyed names, make a list of what you think your partner's got so you can ask them about it at a later point, but just getting it all down on, as you say, on a piece of paper or a trusty XL spreadsheet, something like that will go a long way to being able to have more informed conversations. And I guess the questions ultimately that the formal process is trying to answer is where are you going to live? How much have you got to live on day to day? And what is your retirement plan? So if you think about it in those three buckets, then you can start to think about answering the questions that the court's going to want to see if you have a formal agreement between you that ends your financial responsibilities to each other. So that's super interesting. Thank you. Molly Haylett 7:18 Yeah, absolutely. And what you're saying, Kate, as well about the buckets is really important because it's so easy to, or tempting, I suppose, to just think about the immediate bucket. Where am I going to live? And all of that stuff that is vital and fundamental and really, really important. But also there's all of this other stuff, like you say, like the forward planning, retirement planning, and what does that look like? And it's quite difficult, I find, for people to be looking forwards to something like retirement, when the immediate, you know, what's going on in the immediate life is so big and so important. So again, that will that also helps with, I think, like the logical side of things. Okay, we've got this, this, and this. And then when, you know, once you've got that done, you can start thinking about okay, well, when does when does this become accessible? Because they'll all have different rules, and you know, we can start to break it down even more. And also, particularly from a cash flow perspective. So, understanding actually what am I spending? What do I need to do? Kate Daly 8:12 Yeah, well, exactly. Sometimes that's the first time in forever people get the opportunity to do that, to actually sit down and look. And let's face it, none of us want to do that because I don't really want to be confronted with how much money I'm spending on various items that I'm not even going to list here. But do you know what I mean? It's quite quite confronting, isn't it, when you've actually got to look at what you spend. And then the thought of having to discuss that with somebody else and justify it just feels really uncomfortable. But like you say, I think the important thing here is getting it out of your head and stopping it being a worry and making it into a financial fact, that process is actually very reassuring. And yes, it's going to take some time, isn't it? But you've got to set some time aside at a weekend or an evening. You're going to give yourself a couple of hour block. You're going to do the first part of it as much as you can. Maybe that's going through bank statements. Banking apps now can help you with that all of the time, can't they? You can search stuff. You've got those little graphs they show you of how much, they're not always right, but they're a good starting point, aren't they? How much you're spending on food, how much you're spending on personal care and all of that kind of stuff. So you can use the apps and things to set sort that out. And just, I think just writing a long list of all the things you do spend money on, that in itself is useful because sometimes it's very easy just to say, oh, these are the essentials, it's the utilities, it's the mortgage, it's whatever. But it's all the other stuff that actually like I always think the thing that often gets missed is things like pension contributions. What am I putting into my pension? Or how much do I actually spend on you know my kids going to other people's birthday parties, and therefore it's a present and an activity every time, and all of that kind of. So all of those little things add up. So if you can make that big long list, as you say, what's coming in, what's going out, that's your income and outgoings, and then a list of what have we actually got? What's in my name, what's in your name, what's in joint names. And if you're both going away and doing that, you can then come together and compare notes. And if you do it in that compare notes kind of way, it obviously is going to feel a lot less harsh than somebody making demands about what they want from a particular asset. Molly Haylett 10:32 So yeah, absolutely. And I love the way that you described it about how it's we none of us really want to go and look at our spending. And absolutely everybody, everybody underestimates their spending because firstly we spend different amounts, you know, each month, but there's there's like the living cost, and then there's the life costs, like exactly like you said with kids' birthday parties, and you know, what are you doing for enjoyment as well? So you can kind of understand, well, what do I need as a baseline to live? But then what about all of the rest, which is life and hobbies and you know, things that you might like to do alongside that? So um the longer that you can track it over, the better an idea you get as to actually what what's realistic. But for me, it's very much that at the beginning, it's just about clarity. You use the word informed. How do you come to this from an informed position and like a good starting point of knowing where you are? Kate Daly 11:24 And you so you kind of you've said the important thing here is to get it down on paper. So that's the first tip, isn't it? Get it out, get it down on paper, start to segment it. How do you make sure that's accurate? So there's some information you're gonna have to write off for, isn't there? I think you mentioned before, which is always an interesting one. We all get pension statements, but what's on your pension statement isn't the number you need when you're looking at getting divorced. When you're getting divorced, you need something called a cash equivalent transfer value or a transfer value. And that means you have to ask for that information. So, what other information do you actually have to ask for, Molly? Molly Haylett 12:04 Yeah, well, that's the magic word, the the cash equivalent transfer value. Um, and actually that's really worth getting early if you can, as they can take a while to come through as well. So it's unlikely that you request something like that, getting it in three days, and you might, but often, particularly with certain schemes, and this is in relation to pensions, they can take a little while. Kate Daly 12:25 So, yeah, some of the public sector ones, like teachers and NHS pensions, they can tell more than 12 weeks, can't they? So, your point before about getting this prep done early, even if you don't think you're gonna get divorced for a few months, getting that information early, asking for a CETV is super important because there's nothing worse, is there when all of a sudden the process has started, you're in it, you've got people helping you, asking you for information, and all of a sudden you've got to wait 12 weeks. Russing around how far's the teacher's pension scheme works out your CETV. I mean, it is frustrating. I've seen it happen so many times. So you're right, getting in early, making a list of what you haven't got and making sure that you ask for that stuff in advance feels really important. Molly Haylett 13:10 Definitely, yeah. And often pensions form like such a big like amount, like they're sometimes the same as a family home, or if not the next largest asset. So really, really important. I would also be gathering valuations on things like state pensions as well. Kate Daly 13:24 So people often forget that, don't they? Yeah. Molly Haylett 13:27 Yeah. And super easy to check as well. You can just go online on the Gov website or just chuck it in Google, check state pension, gov, and then it will bring up the website and you can see what you're entitled to because not everybody is automatically entitled to a full state pension. Kate Daly 13:40 So I'm particularly women, isn't it? So it's particularly women. We assume that everyone's got a full state pension, and sometimes that's not the case, and that can impact how pensions, private pensions need to be split to compensate for that. Molly Haylett 13:52 Absolutely. So understanding what you've got before you do nothing else is the most important starting point, I would say. And then I would also be gathering just an idea of what things are valued. And like you said, there's you want you're not going to get it 100% perfect, particularly with things like, you know, houses, pensions, they're going to move slightly in what they're worth, but having a ballpark figure and then saying with updating cash accounts, things like that, you've got apps. So that quite often this information is accessible now. The information that's a little bit you need sometimes requires a bit more digging is things like pensions or investments, depending on exactly what they are and that where they're held. And that would impact kind of how you find it. But again, you're looking for something like a valuation, which you can normally get online. But if you can't get it online, you will be able to get it by giving them a ring. So I would kind of start there, look online, I'll give them a call, but don't wait for the next statement to arrive because they can come annually, sometimes at all, like I say, for old addresses and you move and gradually the account sorts being linked to your address. Kate Daly 14:56 So I just had one bizarrely come through to my new house because I moved house and I just had a pension that I completely forgotten I had. And they've managed somehow to track me down here, but in my old, my previous married name. So it was really bizarre. And I was like thinking, oh my goodness, you know, I had completely forgotten I'd got that for the last kind of 10 years or so. But yeah, that just came. So it is finding old pensions and that kind of thing. You do have to like mentally trawl through, don't you, all the jobs you've been in and think about whether you've had a pension in those jobs and whether or not there are other investments you might have made at that time. It's like you have to kind of reimagine your whole life back, don't you? To see what you were doing and where you were. Molly Haylett 15:39 It's so easy as well to lose pay. I I there the numbers, though I don't know the exact number of what it is today, but tens of billions. There is so much money in missing pensions. You just wouldn't believe how much is missing. It's crazy because people do they they just move on and forget about these pension parts. So being able to go back and look and find that is not easy, but it's made easier now because you can go on things like again, the Gov website's really, really useful starting point. You can go and look at your previous employers and kind of what pension providers they use, and that helps with finding a bit of a trail rather than just going in blindly thinking, where would that be? Kate Daly 16:18 And then what's in this early stage, because we're this first part is all about the beginning part of the divorce process, in that early stage, what do you think is the biggest financial mistake people make? Molly Haylett 16:30 I would say probably around the clarity that there's a few things really that I that crop up as a pattern, but one for me would be just not understanding exactly what you've got and how they're different. Because if you've got, or your your spouse, or you know, in between you, there's let's say 50,000 in cash, 50,000 in a property, and 50,000 in a pension, they are all very, very different. Mechanically they're different, they've got different roles, but actually their future value is really different as well. So not really understanding what you've got and how, and that's really hard in itself because unless this is something that you that you know or you do, it's very unlikely that you under that you're really into the mechanics and the differences. You know, some people come to this just about knowing the word pension, never mind exactly how that's different and what it all means. So um taking the time, you know, using support, whatever it is that that you need to do to understand how they differ. And I yeah, I was I would say fundamentally there's there's things throughout the process, which I'm sure we'll cover on the other episodes that I always say to people, watch out for this, think about that. Kate Daly 17:34 But well, let's come on to that. But I think that's a super point to end on. I was having this conversation exactly over the weekend with somebody that a pension pound is not the same as a house pound. And very often people like to do their little spreadsheets with offsets and all the rest of it, but sometimes that can oversimplify what's happening. And it is really important to think through, like you say, the different class of assets that you've got, what they do in the immediate term. So something that might just look very fair in the immediate term when you actually consider the long-term trajectory of that pound, it might be very different depending on how it's held, and therefore you need to have a thought about that at very least. But I like this point. Get organized, push through the pain, get it all down on paper, get it out of your head onto a sheet of paper. That seems to be the overwhelming advice. So, Molly, it's been great talking to you today. Thank you very much for joining me. Thank you. That's it for part one. Thank you, Molly. Make sure to catch next week's episode for more tips on navigating your finances mid-divorce, where you'll find out how to value the family home and untangle the different types of pension. And of course, you can find me on LinkedIn and Instagram and hear about new podcast episodes by subscribing for updates and visiting thedivorsepodcast.com or find us on your favourite listening platform. We'd love to know how we can help further, so please share your questions on divorce separation or co parenting with us. They might just be a topic of a future episode.