Uncertainty is the word of the moment. Many concerning events and issues continue to simmer in the background of life. Elections. Inflation. Interest rates. Ukraine and Russia. China and many countries. High energy prices. Ongoing Covid cases. Monkeypox. High debt levels. It goes on, but these are all knowns.
Uncertainty is unknowns. The things you can’t see and don’t know are going to happen. Unconsciously, it seems many people realise this. Concerning macro events and issues may have registered with them, but they’ve turned their attention to something else.
Using the internet as a guide, the most captivating event in the world recently has been the Johnny Depp/Amber Heard defamation trial. Related searches on Google Trends, which tracks popular Google searches, are leading all comers. Even misspellings of Johnny Depp’s name such as “Johnny Deoo” (look at your keyboard to understand why) are spiking.
We might roll our eyes at what’s become sordid entertainment for some people, but it’s litigating a relationship breakdown. Celebrities aside, two people not getting on very well is something that’s more common and relatable to most people than the war in Ukraine. Whether it will be us, or someone we know, it’s often said more than 50% of marriages will end in divorce.
Not quite. The 50% figure is slightly exaggerated. It was forecast the divorce rate would be over 50% because it had been steadily increasing during the 70’s and 80’s. According to the US Census Bureau in 2009, the percentage of men and women ever divorced by age 55 was around 36% for those born in the 1940’s. For 50 year olds born in the 1950’s, they were on a similar trend line of a mid 30% divorce range by age 55.
Total divorce rates do increase with age, but divorce has decreased for those in lower age brackets who were born in later decades. Some more granular data also shows the divorce rate is lower than 50%. With the true figure somewhat below the often-quoted stat, even one third of marriages ending in divorce remains a massive upheaval in many lives.
Why can it be so messy and emotional? Marriage is akin to speculating. Expectations are high, but few acknowledge the risks involved. A paper on life changes and divorce from 2016 highlights marriage is a risky undertaking because people marry with incomplete information and continue to learn about their partner over time. This results in three broad divorce causes. Firstly, the person selected is not the best partner match. Second, there are unforeseen changes in the other party or in the marriage. Third, there is an event that sheds new light on the quality of the marriage or other party
When the risks begin to emerge, people have already made ongoing and substantial allocations of their time, effort, and financial resources to the marriage. Breaking it up can be seen as an immediate loss of that accumulated time and effort (marriage equity). The risks that weren’t apparent (or overlooked) come sharply into focus. They overwhelm and destroy the marriage equity.
And divorce doesn’t simply tie matters up when that marriage equity is written off. A paper on the consequences of divorce from the Journal of Marriage and Family notes that divorce is not an event, but a process. The process is a sequence of events that are stressful, and these stressors increase the risk of negative emotional, behavioural and health outcomes for all those involved.
With the marriage equity written down to zero, the attention turns to any child custody and financial resources. This may be a long-drawn-out battle or quick resolution. At the end of the settlement both parties may be in a worsened emotional, behavioural or health state. At this point, the financial realities come into focus. They will vary.
One party, possibly the women, has access to more financial resources than they’ve ever had to deal with.
One party, possibly the man, has access to less financial resources than they assumed would be in their control.
In the case of a more even financial partnering, each party may feel the legal fees and resource division has put them in a diminished position.
The above outcomes will result in two overriding financial feelings: confusion and frustration.
In the case of the party who is now control of more financial resources, they weren’t previously making financial and investment decisions. Confusion is the feeling. No idea where to start. Fearful of making a mistake. A scarcity mindset where protecting the money is the overarching feeling. This may make them liable to be taken advantage of by promoters of “safe” investments, which are nothing of the sort.
In the case of the party who feels they’re in control of less financial resources, they were previously making the majority of the financial and investment decisions. Frustration is the feeling. They will feel slighted. Overly impulsive to get started again. An abundance mindset, where getting back what was lost will be the overarching feeling. This may make them liable to be taken advantage of by promoters of great stories of investments offering high returns.
In the case of a more even financial partnering, it may be a combination of both scenarios, depending on their competencies or assumed competencies. Someone may have had a strong earning capacity, but their investment knowledge was limited, and the other party made the investment decisions. For the party that made the investment decisions, they may feel as they are losing ownership if their decisions have been lucrative.
How confident should a divorcee feel in their financial decision making at this point? The Depp/Heard trial highlights people are not necessarily at their best during the divorce process or in the aftermath of divorce. Potential emotional, behavioural or health issues from the divorce combined with financial confusion or impulsiveness. It’s a recipe for mistakes.
Bad decisions only compound existing problems and put a recovery further behind. We’d say seek some financial advice, but to those plotting their next move: just pause. Setting aside decisions will offer the opportunity to regroup and recover. Any investment opportunity worth its salt will always be available in the future.
Shared with permission of our licensee FYG Planners and friends at Mancell Group.