It sounds mercenary, but your property settlement, in which you deal with the financial consequences of separation or divorce, is really just a commercial transaction. An important and life-changing financial ‘deal’, but a transaction nevertheless.
To examine whether that transaction has been favourable for you, the cost of its completion must be measured against the outcome. In other words, after the costs of the transaction were paid, has a profit been struck?
Any by ‘profit’, I don’t mean your financial outcome. I mean the total outcome, after the costs of the transaction on you, any children, your relationships, and your ‘life’, present and future, have been taken into account. This ‘profit’ will mean something different for every person.
In this sense, it is like examining the outcome of an investment or business ‘deal’ – after all the costs of your divorce have been deducted, are you in the black, financially and emotionally?
So how do you maximise your profit?
The key is to treat your property settlement like the commercial transaction it is, and ask yourself the following questions: What result am I seeking, and what will that cost me? Can I be better off by approaching this in a different way?
By doing this, you are introducing an element of commerciality to problem-solving – in exchange for outlaying on ‘costs’ (whether they be financial costs, time costs, emotional costs, or ‘lost opportunity’ costs – see my last Blog on ‘The hidden costs of divorce’) you are expecting to receive a commensurate benefit in your final outcome.
This is a difficult balance to get right, but the following will be your guide – if the cost is disproportionate to the benefit, then you are eating into your profits (and in a worst case, those profits are being taken into deficit), and may need to re-think your approach.
The following will assist in getting the balance between ‘cost’ and ‘benefit’ right:-
- Leave emotion out of the equation – The financial aspects of divorce and separation are a numbers game – keep it that way. Apportioning blame for the demise of the relationship, or exposing your former partner’s behaviour and shortcomings are seldom relevant. To have these things ventilated in Court will certainly make you feel vindicated, but that feeling will probably be short-lived, and will likely not be reflected in the result in any tangible way. It is therefore worth little to you as an objective. So don’t spend costs on something which will likely not achieve any ‘profit’ for you – costs are to be spent only on things that will ‘matter’. Dealing with the emotional aspects is still essential, but your money is better spent in getting professional help from a counsellor or therapist;
- Be strict with yourself – Your objective is to achieve the best outcome for the least cost, so that you can move on with a new life, and all of the things that are important to you in that life (your children, your new relationships, your family and friends, your work). If you feel yourself wavering from that objective by allowing emotions to impact on your decision making, be frank with your lawyer that you feel your judgment on legal issues is being clouded by non-legal issues – they will be able to bring you back to the facts (your best case outcome, the direct and indirect costs of achieving that outcome). Then talk to your counsellor or therapist about your feelings – they will help you get those things off your chest, and enable you to focus on the numbers again. Remind yourself that, as I have written in a prior blog, living well is the best revenge, and that achieving a ‘profitable’ outcome in your divorce (one which is well balanced in terms of costs) is how you will get there;
- Be commercial – Use the data you have assembled (about the range of outcomes you can expect, and the costs you will likely incur) to inform your decision making. If to achieve your optimum outcome will cost $50,000 in legal costs, and take 6 months, are you better to avoid those costs by proposing a partial compromise today? Though your outcome may have dropped in dollar terms, if it is achieved in months rather than years, and if you are able to have the conflict out of your life sooner rather than later, is that worth more to you than money? This is also where ‘lost opportunity costs’ can have real impact – if you had your property settlement today (as opposed to having to wait 18 months for it), what would you be able to do with it – re-house in a buyer’s market, grow your business, invest when market conditions are perfect? Do not be afraid to simulate various outcomes: if you can achieve an outcome today, rather than having to wait for it, is that actually ‘worth’ more to you than achieving your ideal financial outcome? If ‘yes’, then you can adjust your objective accordingly, while still achieving a ‘profit’ for you and your unique situation.
Whether you are just embarking on the resolution of the financial aspects of relationship breakdown, or whether you are in a long-standing but unresolved financial dispute, set aside 30 minutes to ‘reboot’ your thinking by looking upon the problem which faces you as if it were a commercial transaction, answering the following questions:-
What is my objective?
Is that objective legally achievable – what is my ‘best case’ and ‘worst case’?
Can I refine that objective (e.g. is any part of it driven by emotion; should any part of my objective be abandoned as being unlikely to provide me with any long-term or ongoing benefit)?
What will it cost me to achieve that objective in:-
- Legal cost
- Emotional cost
- ‘Lost opportunity’ cost
Will I be better off if I can reduce my exposure to cost? Can that justify an alteration in my objective?
What does my adversary’s behaviour suggest about their appreciation of the costs (direct and ‘hidden’) they are incurring (and can a discussion on this subject create an opportunity for compromise)?