There’s no easy way to say it – divorce can take a heavy financial and emotional toll. If you’re feeling overwhelmed by everything you’ve been through, your financial future could be the last thing on your mind. But the good news is that knowing exactly where you stand and taking financial control can also help your wellbeing.
Here, we take a look at the challenges you might face and the steps you can take to get back on track for a secure financial future.
The first step is to close any accounts held jointly with your former partner, or change them to “both signatures only”. You should remove your name from joint agreements wherever you can. And it’s also important to update the beneficiaries of your superannuation, insurances and will.
If you have shared property, assets or debts, you will need to work together to divide them up.
If you and your former partner come to an amicable agreement, there’s no need to take any legal action, although you can formalise the agreement by applying for consent orders. If you can’t agree on a fair split, you can apply to a court for financial orders. These will settle the division and set out any maintenance arrangements.
When you’re considering your shared assets, don’t overlook superannuation. If you think you might be entitled to a share of your partner’s super, it’s a good idea to get legal advice, as super is governed by a number of laws with slight variations across some states.
Before you can plan for the future you need a clear picture of where you are now.
“That means identifying the value of your assets and the size of any debt,” says Russell Kapeechkin, Senior Financial Adviser. “Once that’s done you can start making realistic decisions about your financial future.”
ASIC’s Moneysmart net worth calculator can help you to work out your current situation. You can also talk to a licenced financial adviser to make sure nothing is overlooked.
“Professional advice is particularly important if your finances or investment structures are complicated,” says Russell. “For example, you and your partner might own a business together, have trust structures in place or be involved in business with other people.”
The next step is to make sure your income can cover your new set of outgoings.
“It’s a sad fact that divorce or separation will effectively halve most people’s income and assets," says Russell. “That usually means making changes to your spending and lifestyle.”
If you do need to cut back, a budget can help you find the easiest ways to reduce costs and map out your future spending. There are various templates online, such as the Moneysmart budget planner, that can help you set up a realistic budget and then stay on track.
Russell sees accommodation as the number-one priority. “Our first concern is that our clients are settled in a suitable home,” he says.
Your options will vary depending on the available assets and the settlement. For example, if you had a joint mortgage, you could either decide to sell the property outright and divide the proceeds, or one of you could refinance to buy out the other’s share
“A number of factors will affect your decision about where you live,” says Russell. “For most people, cost will be the first consideration, followed by location. For example, you might want to be close to your children if they aren’t living with you, near their schools and within easy reach of work. Whether you’re planning to rent or buy, your budget will help you to decide what you can afford."
Retirement may be the last thing on your mind but it’s vital to think about the future. This is particularly important for women who, in general, have significantly less super than men. In fact, research has shown that, on average, a divorced mother has 37 percent less superannuation than a divorced father.
“If you can manage it, it’s a good idea to boost your retirement savings by making extra contributions to your super,” says Russell.
“In the meantime, it’s important that any investments are structured to perform as well as they can – and you should also check you have necessary insurances in place. A professional adviser can make sure you’ve covered off all the necessary details.”
It’s true that staying on top of your finances is good for your mental and emotional health, but focusing too closely on money can become a stress in itself. When you’ve been through the ordeal of a divorce you need fun and joy in your life. Finding that balance is the key to peace of mind.