How to manage your finances after going through a divorce

Dubai resident Smitha Ravi and her husband agreed to divorce in 2016. However, she had lost an information technology job after an 11-year stint in 2015 and was left to fend for herself and her daughter Gauri, who was eight years old at the time. Ms Ravi, 39, an Indian human resources assistant at an insurance broker, does not receive child support or alimony from her former spouse. She used her gratuity from the IT job to settle her debts and pay their daily expenses for a few months. “I used to emcee at events or parties since 2009 as a passion or hobby and this turned out to be my bread and butter in 2016. I used to host events for Dh250 to Dh400 to sustain ourselves. I believe in fighting my own battles and kept seeking help to the bare minimum,” she says. The most contentious financial issues that typically arise between couples undergoing a divorce include the division of assets, alimony and maintenance, debts accumulated by the couple, visa sponsorship and child support expenses such as medical cover, says Devanand Mahadeva, director of Bestwins Law Corporation. “Financial support is essential for child support and maintenance, specifically in the case where the wife may be a homemaker,” he says. The household incomes of women could fall by up to 33 per cent in the year after a divorce, compared with 18 per cent for men, according to research from London-based financial services company Legal and General Group, which interviewed 2,008 adults aged above 50 who were divorced in 2020. Furthermore, 31 per cent of women are more likely to face financial struggles after divorcing their partner, compared with 21 per cent for men, and this is particularly true for older women, the research found. After a short-term stint in another IT role, this time in sales, Ms Ravi landed a job in 2017 as a learning co-ordinator – a role she held for two years. In 2019, she took up an HR role with her current company. She continues to offer her services as master of ceremonies at events and parties to generate additional income. “I have a very supportive and empathetic employer who makes me feel secure as a single mum. If I need any financial aid, they are very accommodating,” she says. Despite non-negotiable expenses such as rent, school fees, utility expenses and the internet, Ms Ravi says she manages to set aside a small amount for entertainment expenses. Although she does not manage to save much, she has no debt in the UAE and recently bought a car after 11 years of using public transport. About 45 per cent of women at various stages of divorce said their focus is paying off debt, according to a 2018 study, which polled 1,700 people, by online auction marketplace Worthy . More than seven in 10 (72 per cent) did not choose retirement savings as their main concern. “There were times when we could not afford to buy movie tickets. So, I used to create a theatre experience at home. Such small luxuries gave us immense joy,” Ms Ravi says. She also buys non-perishable items in bulk to save money and says her daughter, Gauri, now 14 years old, does not make unreasonable demands as she knows the financial challenges her mother faces. Ms Ravi does not feel the need to send Gauri, a 9th grader, to private lessons as she is doing well at school. However, she pays for her to attend dance classes. “I want to make her independent and strong so she can take care of things herself in future,” says Ms Ravi. “For women who are facing a similar situation, I wish to tell them that if I can make it this far, so can you. Just believe in yourself, have the right and positive attitude and give it your best.” If a couple is willing to settle and agree to separate, the divorce process is simple and takes about two to three months, according to legal experts. It is called a mutual consent divorce and costs between Dh8,000 and Dh15,000 in legal fees and other charges. “This kind of divorce does not require either of them to establish a ground for divorce and is a matter of negotiating the best possible arrangements between the spouses, especially where children and financials are involved,” says Mr Mahadeva. However, if there is no agreement, the divorce will be long and costly, with the spouse petitioning the court expected to provide grounds that justify the dissolution of the marriage, he says. Such a divorce will cost between Dh30,000 to Dh60,000 in legal fees and other charges, according to Mr Mahadeva. The division of assets during a divorce depends on the law the couple decide to file their divorce on. “If it is Sharia, the distribution of assets is simple in that each spouse will retain assets and property held in their name. However, if the couple want to apply laws of the country where the marriage took place or their country of origin and, especially, if it is a common law system, then the assets acquired before marriage or inherited property may become vulnerable in a divorce,” he says. Under the principles of Sharia, or Islamic law, custody of a young child is usually awarded to the mother so as not to upset their welfare and upbringing. As guardian, the father must cover any expenses related to the child, including those of the custodian, according to Mr Mahadeva. Assets, jointly held financial securities and debt accumulated during the marriage may also be looked at, he says. Changes made to the UAE’s personal status laws in November now offer residents a path to divorce that is not governed by Sharia. A couple from any religion that chooses to divorce in the UAE will have proceedings dictated by the laws of the country in which they married. “If a couple wishes to apply the law of the country where the marriage took place or the country of their origin, then the relevant articles of law need to be translated into Arabic, duly attested and presented before the court. This will be an additional cost,” says Mr Mahadeva. The laws need to be interpreted to be directly applied in court. In some instances, an article of law may need to be interpreted in line with another article of law and then it becomes complicated, more time consuming and expensive as translations and attestations will be required and the court may revert to the UAE’s Personal Status Law in such cases, he says. “We always encourage couples to mutually settle, even more so when there are kids involved. So, irrespective of the new laws, if couples agree to mutually settle, this will be a less complicated and cost-effective approach to getting a divorce in the UAE,” says Mr Mahadeva. The National spoke to personal finance experts to understand what divorced people can do to protect their financial future. Reassess your current situation to see exactly where you stand with savings, assets, debt and your continuing income. This will help you determine which direction you want to go, says Rasheda Khan, a wealth and wellness expert and founder of Design Your Life. One can sometimes find themselves leaving a marriage with high debt and, in some cases, on the verge of bankruptcy. Once the divorce has been granted and the financials are known, review all continuing expenses and cut down where possible, says Rupert Connor, a partner at Abacus Financial Consultants. Examples of this could be downsizing your home and choice of car, cancelling monthly subscriptions and shopping at cheaper grocers, says Mr Connor. Ms Khan urges people who have gone through a divorce to set a budget to help them stay within their means. "Also set a monthly budget to build an emergency fund if you don’t already have one,” she says. “Start allocating savings towards some of your long-term expenses and goals. It is better to put smaller amounts away for longer than it is having to find larger amounts over a short period of time.” A divorce can be emotionally challenging and finances can heighten the distress. Firstly, pick a time to discuss money when there is no other agenda and make sure you both commit to finding common ground by looking at things practically and keeping emotions at bay, says Ms Khan. “If you are unable to resolve this together, then have a back-up person such as a mediator to help you. Pick somebody together as your back-up person at the beginning of this journey, then you will have someone whom you both agreed upon when required,” she says. The divorcing couple can themselves, or with the help of a mediator, come up with a financial plan, decide on child custody and write it down. “There will be plenty of moving parts, so the proposal can be flexible and will likely change over time during the mediation and negotiation period. It is better that this agreement is reached rather than have a judge decide, who may not be in possession of all the soft facts relating to either spouse’s circumstances,” says Mr Connor. Once your emotions have settled, see this an opportunity to start a new life and consider letting go and selling some or all of the possessions built up during the marriage, he says. “This will not only provide some short-term capital but also a sense of closure.”

How to manage your finances after going through a divorce

The division of assets and discussions around alimony, debt and child support are the most common sticking points when a marriage breaks down