Overcoming post-divorce challenges associated with managing finances like living expenses and childcare while also saving diligently Image Credit: Creative Commons

Dubai: Financial ramifications of a separation or divorce are as exhausting as the associated emotional turmoil. Usually there are many aspects to sort out in a separation or divorce settlement. These include splitting up joint assets, sorting out debts, deciding custody of children as well as childcare support and alimony, among others.

If a couple have a prenuptial (premarital) agreement, financial expectations are clearly laid out often making the resolution process easier during separation or divorce. Couples also have the option to sign a separation contract that lists out rights and obligations. While a prenuptial is a legal agreement signed before marriage outlining what will happen with a couple’s assets if they divorce or one of them dies, a separation contract is signed when a couple decides to separate.

In case of divorce the legal expenses vary based on whether it is amicable or contested and contingent to specific instructions. According to UAE-based legal advisory firm James Berry and Associates, the potential cost of getting a divorce in the UAE may range between Dh12,000 and Dh30,000. This is applicable in the Court of First Instance (first and one of the three degrees of litigations) where the proceedings are initiated, and a local advocate is instructed to deal with a contested divorce.

After separation, here is how two UAE residents managed their finances. (In both cases, divorce has not been filed yet.)

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After separation, here is how two UAE residents managed their finances.

Evaluate finances to create a survival plan

Five years ago, when UAE-based Indian national Arti Bhagat decided to separate from her spouse of 13 years at that time, her father asked for a “survival plan” based on her then financial situation. As a single mother to her then 11-year-old son with no alimony or childcare support from her spouse, Bhagat had to manage certain non-negotiable expenses. These included her son’s tuition fee and transportation adding up to INR285,000 (approximately Dh14,000) annually along with their living expenses.

“Although I was teaching in a good school in India that offered me a decent salary, free transportation and meals as well as medical insurance, for a sustainable survival plan I had to earn more. So, I started applying to schools abroad and fortunately got hired in Dubai,” Bhagat shared. “Along with a decent salary, the school offers me visa, medical insurance, a furnished accommodation, annual airfare to the home country as well as one time relocation allowance of Dh2,500. The school also offers free tuition for my son and even agreed to sponsor his one-way airfare of INR19,000 (Dh950) when we relocated, deductible from my monthly salary over a few months.”

Now in a better financial situation, for Bhagat relocating to a new country with her son proved to be a sustainable survival plan. To create a survival plan, she also recommends having a side hustle based on skills wherever possible.

Financial independence is crucial

The situation was slightly different for UAE resident from Pakistan Zeba Saad (name changed on request) who is a single mother to her six-year-old son. As the sole breadwinner Saad has reined in expenses after separating from her spouse last year. “I have been maintaining an excel sheet since the past four years to monitor expenses, which now indicates a considerable reduction. Prior to the separation, our expenses would touch Dh25,000 in some months, which was way above my monthly earning. These were months when I had to pay the quarterly sum of Dh11,500 for house rent. Now even in months where I pay house rent, the expenses touch Dh14,000.”

Just before the separation, Saad suffered from serious stress-related health problems incurring heavy expenses of Dh8,000 in two months. Such expenses have also reduced drastically. Saad believes that financial repercussions and having a child often deter people from stepping out of toxic relationships. She strongly recommends financial independence to ensure basic upkeep, even if it means starting with a small income.

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Photo for illustrative purposes only Image Credit: Pixabay

Save diligently

Both Bhagat and Saad agree that saving consistently and diligently is an absolute necessity to secure the future, especially in cases where there is no asset or financial support to rely on.

In this regard Saad was fortunate to receive sizeable inheritance from her mother that she carefully saves to secure her child’s future. “Along with the inheritance money, I have some jewellery too that I could sell and reinvent the money. My brothers are incredibly supportive and have been advising me to reinvest smartly to get healthy returns.”

On the other hand, Bhagat had to diligently build up her savings over the years. Starting from her first job in India that paid INR6,500 (approximately Dh350) Bhagat used to save INR2,500 (Dh125) per month. As her salary increased to INR30,000 (approximately Dh1,500), savings rose to INR15,000 (Dh750) per month. Now she manages to save at least INR600,000 (approximately Dh30,000) annually. “When I started working 11 years ago, I had created a recurring deposit account to transfer half of my salary at the beginning of every month. Even today I have two accounts, one where I save almost half of my monthly salary. And I keep increasing the amount by transferring whatever I am left with at the end of the month.”

“Back in India, I also made informal savings of up to INR2,000 (Dh100) per month through kitty parties. These are social gatherings among women, a concept that is quite popular in India. Plus, whenever I received cash on special occasions, even as little as INR500-INR1,000 (Dh25-50), I meticulously saved it thereby growing my emergency fund. I used a part of this money INR25,000 (approximately Dh1,250) to sponsor the visit visa for my son. In addition, my provident fund money added up to INR60,000 (approximately Dh3,000). While relocating to the UAE, I had almost INR75,000 (Dh3,700) to rely on.”

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Budget expenses

Budget expenses

Bhagat is a stickler when it comes to budgeting monthly expenses. Her monthly living expenses include utility bills (Dh2,000), groceries and food (Dh800). Then there are annual expenses for her son’s visa (Dh800 for two years), medical insurance (Dh600), school transportation (Dh3,500) and uniforms (Dh450). His soccer lessons and their respective personal upkeep add to the expenses. “To keep the expenses under check, I try to shop smartly and avail offers for my son’s extracurricular activities. For example, I buy non-perishable Indian groceries for Dh150 that lasts for two months. I always order perishable groceries in bulk from online platforms that costs Dh350 and lasts for two weeks. I also try to keep aside Dh2,000 per month to create an emergency fund.”

Sharing additional tips Bhagat added, “I always try to cook at home, eating out only occasionally. For bigger purchases, I use a credit card and avail EMI (equated monthly installment) plans offering zero per cent interest for 6 to 12 months.”

Saad also believes in budgeting monthly expenses. Despite living and childcare related expenses, she is now able to save at least Dh2,000-Dh3,000 every month by carefully budgeting her expenses. “For me, the biggest monthly expense is utility bills accounting for Dh1,300 in total. Our food related expenses have reduced drastically. I spend Dh250 in total to avail a home cleaning service four times a month and Dh130 on fuel. In addition, since my son and I have some health conditions that are not covered by the medical insurance, I spend at least Dh250 to buy medicines.”

Saad also plans to rent a one-bedroom apartment this year as opposed to continuing in her current two bedroom to further save on expenses.

Tips to manage financial setbacks associated with separation/divorce

Tips to manage financial setbacks associated with separation/divorce:

Heading the family law department at James Berry and Associates, Dee Popat offers some advice to handle financial setbacks arising from a separation or a divorce.

Follow a financial regime: During the marriage if financial commitments are being jointly managed by a couple, it is advisable to periodically evaluate the financial situation. Expenditures can either be shared or planned carefully. For instance, if a particular expense such as payment for a credit card is managed by one person, the other could manage remaining outgoings.

Dee Popat

If such arrangements are not viable or practical, the couple must still ensure transparency in handling family finances. When one spouse is unwilling to disclose information, it could be a worrying sign. If a financial regime is followed, even in case of separation/divorce, it becomes easier for a couple to part ways without having the extra burden of marital financial commitments.

Advisable to have a prenuptial agreement: Such an agreement not only assists couples to be aware of their obligations following a separation/divorce, but also minimises legal expenses. Moreover, since separation/divorce can be emotionally exhausting for the family, having such agreements may help in alleviating anxieties. Another way to potentially reduce, if not eliminate, areas of contention could be to enter a Family Ownership Contract pursuant to Dubai Law No. 9/2020, which is designed to assist in regulating family ownership in the emirate. Such a contract would determine interests in movable or immoveable property where the family members are bound by common ownership.

Some ways to avoid lengthy and costly court hearings: There are several options available to avoid lengthy and costly court hearings to resolve disputes over joint assets, custody and alimony. First, the couple should try to discuss the issues with a view to reach an amicable agreement without legal intervention. The parties can try an alternative dispute resolution process such as Mediation or Arbitration, which again would save on lengthy and costly court hearings. Lawyers can be instructed to negotiate through correspondence or arrange meetings to facilitate an amicable settlement, which could sometimes be a lengthy process but tend to be cheaper than court hearings. On reaching a resolution, the lawyer can draft a Settlement Agreement and the parties can proceed through the UAE Courts on an amicable basis.