The cost of financial uncertainty on relationships

As energy bills and household costs look set to break further records, the financial impact of the cost-of-living crisis is well known. Families across the UK are adjusting budgets and cutting costs, and many are having to use savings or take on debt to make ends meet.

The impact is widespread. A recent Stowe survey revealed that 88% of people feel they have already been financially affected by the cost-of-living crisis. With 61% admitting that they worry they’ll struggle to cover rising costs.

Another result of the increased stress and uncertainty caused by money worries that is being felt by many couples, is the cost-of-living crisis’ effect on relationships.

Cost-of-living crisis and relationships

We see daily predictions of unprecedented future energy, fuel, and food bills as well as interest rate increases and talk of recession. These fresh financial concerns can have a significant impact on your relationship, even if money wasn’t a cause of tension between you and your partner before.

56% of people we spoke to say the cost-of-living crisis is already causing friction in their romantic relationship.

The main reasons included:

  • Not enough money coming in
  • Struggling to pay the bills
  • Not being able to maintain their current lifestyle

The lack of certainty, or reassurance that things will improve in the short-term, has left 66.5% of people saying they fear the cost-of-living crisis will negatively impact their relationship in the future.

Revealing differences

For some people the increased focus on money has highlighted that their partner’s financial priorities are different to theirs, or that their spending habits aren’t sustainable. For others, it may expose larger issues like partners who haven’t been honest about income, spending or debt.

New money tensions

Money concerns can contribute to pre-existing relationship problems for some couples. While for many the increased pressure can cause new conflict and unhappiness that didn’t exist before. Our research shows 50% of people who are experiencing relationship difficulties because of the cost-of-living crisis said they had no existing tensions about money before January 2022.

Living in limbo

Nobody can accurately predict what’s ahead for the country’s economy and household finances. However, it’s clear that things are likely to get worse before they get better with inflation rates continuing to rise and the next energy price cap increase planned for Autumn.

The cycle of uncertainty and worry that creates a sense of limbo for many couples, combined with tighter finances, is likely to have a long-term effect on many relationships, whether they choose to divorce or not.

Another tool for abusive partners

The reality for others is that the-cost-of-living crisis is preventing them from being able to leave a partner, essentially trapping them in their relationship.

This is particularly apparent for domestic abuse victims. Use of financial control to gain power over a partner is a common approach used by financial abusers and coercive controllers. As a result of diminished independence and freedom, many victims simply cannot leave their partner.

For others, the inevitable cost of leaving and rebuilding their life just cannot be met, even if they are able to safely escape their abusive partner, meaning they have no choice but to stay.

The cost-of-living crisis is enabling abusers, giving them an additional way to continue or establish abuse, leaving many vulnerable to abuse without a way out.

Let’s stay together

A quarter of people we surveyed revealed they are staying in their relationship because of concerns about the cost-of-living crisis.

With rent and property prices at an all-time high, and household bills forecast to continue rising, for some the cost of creating two households from one doesn’t stack up.

It’s also been widely documented that single people are expected to be hit especially hard by rising costs. The prospect of facing current financial difficulties alone can be enough for some people to delay separation.

Raising the topic of separation

Knowing that separation or divorce could leave you or your ex-partner in a difficult financial position makes it even harder to initiate discussions and reach agreements about ending your relationship. Financial strain can make finding a mutually beneficial way to move forward more difficult, and conflict between couples can be more likely.

While managing day-to-day costs is a challenge, it’s understandable that separation can feel like an unnecessary additional cost. It’s not surprising then that couples are choosing to stay together despite knowing that their relationship has run its course.

Highlighting financial imbalance

Ending a relationship when you share finances is complex at any time but can be especially difficult when money is tight. Untangling years of shared responsibility and dividing assets risks leaving both individuals financially worse off. Unfortunately, in some cases, divorce or separation can leave one partner more financially vulnerable than the other.

Preparing for divorce

If you’ve weighed up the options and decided to go ahead with divorce, what can you do to best position yourself under the current financial climate?

  1. Carefully review all your outgoings in detail and consider any known future adjustments. Are there changes that can be made now to help you prepare for further increases in living costs? Make sure you account for the known future adjustments when agreeing a financial settlement with your partner.
  2. Ideally agree that any maintenance is on a self-renewing basis, so that instead of being locked in at a fixed figure, it can adjust annually in line with inflation, so at least this accounts for some increase over time.
  3. Consider the true future value of assets and whether a decrease in value is likely, to future-proof yourself as much as possible. If one party retains property while the other retains cash in the bank, the comparative value in time could become imbalanced. As financial negotiations continue, keep this in mind and consider getting updated valuations if you think the value of assets may have changed significantly.
  4. If you are thinking of remortgaging your home to achieve a financial settlement, think about how changes to interest rates, house prices – and therefore equity – may affect you.
  5. If you are agreeing to pay the other party in the future and this is based on the value of the family home, consider whether it is better to phrase that as a percentage of the future value of the home rather than a fixed lump sum based on its current value?
  6. Whilst it is possible to delay reaching a financial agreement until the cost-of-living crisis has eased, there is no guarantee how long that will take and the risks may outweigh the benefits.
  7. As divorce is a pivotal time for your future finances, we recommend that whatever your financial circumstances you seek advice from an independent financial advisor.
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