How a Cashflow Model Can Help with Financial Settlements in Divorce

Divorce is one of life’s most challenging experiences, and the financial aspect of it can be particularly overwhelming. When emotions are high, making rational financial decisions can be difficult. Working with a divorce financial planner to create a cashflow model can be an invaluable tool in navigating the financial settlement process.  

What Is a Cashflow Model?

A cashflow model is a financial projection tool that helps you understand how money moves in and out over time. It takes into account income, expenses, assets, liabilities, and potential future changes. By visualizing these elements, a cashflow model provides a clear picture of your financial situation both now and in the future. They should be created by a financial planner who can ensure that the inputs and assumptions are accurate.  

Why Is a Cashflow Model Important in Divorce Settlements?

Divorce settlements involve the division of assets and financial responsibilities, and both parties need to ensure they are financially stable post-divorce. Here’s how a cashflow model can help:  

1. Clarifying Financial Needs
   A cashflow model helps determine how much money is required to maintain a reasonable standard of living after divorce. By analysing expenses and income, it provides an estimate of financial needs, ensuring that you are not left struggling.  
2. Assessing Asset Division
   Not all assets are created equal. While one party may want to keep the family home, it’s essential to consider ongoing costs such as mortgage payments, maintenance, and taxes. A cashflow model can project the long-term impact of keeping or selling assets, helping you to make informed decisions.  
3. Determining Spousal and Child Support
   Support payments are a significant part of divorce settlements. A cashflow model can assess whether a proposed support amount is sustainable for both the payer and recipient. It can also model different scenarios, such as changes in employment or unexpected expenses.  
4. Planning for the Future
   Divorce is not just about the immediate financial situation; it’s about long-term financial security. A cashflow model can project financial stability over time, taking into account retirement savings, inflation, and potential career changes. This helps ensure that financial settlements are fair and sustainable.  
5. Reducing Stress and Conflict
   Divorce negotiations can become highly contentious when finances are unclear. A cashflow model provides an objective financial analysis, reducing uncertainty and allowing you to negotiate based on facts rather than emotions.  

How to Create a Cashflow Model for Divorce

While it is possible to build a cashflow model using spreadsheets, financial software, or online tools, seeking guidance from a divorce financial planner is advisable if it’s affordable. Here are the key steps that a specialist will take:  

• Gather Financial Information: Collect details on income, expenses, debts, and assets.
• Identify Future Needs: Consider lifestyle changes, children’s education costs, and retirement planning.
• Model Different Scenarios: Evaluate different settlement options to see how they impact financial stability over time.
• Review and Adjust: Update the model as circumstances change to ensure continued financial well-being.  

A cashflow model is a powerful tool that brings clarity and confidence to the financial side of divorce. By providing a detailed, long-term perspective, it helps both parties make fair and informed decisions. If you’re facing a divorce, consider working with a financial professional to develop a cashflow model tailored to your unique situation. It’s a step that can help pave the way for a financially secure future.

Tamsin Caine
Tamsin is a Chartered Financial Planner with over 20 years experience. She works with couples and individuals who are at the end of a relationship and want agree how to divide their assets FAIRLY without a fight.

You can contact Tamsin at tamsin@smartdivorce.co.uk or arrange a free initial meeting using https://bit.ly/SmDiv15min. She is also part of the team running Facebook group Separation, Divorce and Dissolution UK

Tamsin Caine MSc., FPFS
Chartered Financial Planner
Smart Divorce Ltd
https://smartdivorce.co.uk

P.S. I am the co-author of “My Divorce Handbook – It’s What You Do Next That Counts”, written by divorce specialists and lawyers writing about their area of expertise to help walk you through the divorce process. You can buy it here https://yourdivorcehandbook.co.uk/buy-the-book/