Breaking up is hard to do! Particularly when it comes to getting back in control of your finances.
We outline some important steps that you’ll need to take following divorce or separation.
“Breaking up is hard to do!” as the saying goes… and this can certainly be the case when it comes to getting back in control of your finances following divorce or separation. Aside from healing emotionally, you need to consider the financial outcome of the split too and while you may not want to focus on your finances, there are some important steps that you will need to take in order to feel financially independent and secure again.
1. Get to know your numbers – The first step is to assess where you are financially. Work out what your income and expenses are, what assets you have and what debt is now in your name. Be clear on what payments you have planned now and in the future. Knowing these will give you some clarity and help you better plan and prepare for the future.
2. Separate your finances – You’ll need to remove yourself from any joint assets, bank accounts, utility bills and other joint agreements that you had in place. While it can be time consuming to update all the organisations with your new information or to set up new accounts, this step is very important to ensure that you can start fresh for your new future and remove yourself from any future financial obligations.
3. Educate yourself – If you have always relied on your ex-partner to handle all or some of your finances, you may wish to educate yourself to be able to confidently manage your finances. Find a trusted mentor or adviser and don’t be afraid to ask questions to make sure you understand. There are also many online courses, books and workshops that you increase your personal finance knowledge and skills, including our Knowledge Centre.
4. Reset your expectations – You may be used to a double income, or you may have relied on your ex-partner financially and now need to get used to supporting yourself. So take time to work out what your lifestyle will be like now that you’re on your own. For many it can be hard to adjust from two incomes down to one and a lifestyle that is somewhat different to what you had previously. Being realistic on what you can actually afford and not afford will help you to spend within your means and avoid getting into debt.
5. Set new goals – The financial goals that you held with your ex-partner may no longer be realistic or achievable for you on your own. It’s time to set your sights on new goals for your financial future and any dependants. This can be a time to consider your personal dreams and goals and focus on setting yourself up for the future that you want. Your financial adviser will be able to work with you to put a plan in place to help you achieve your new spending, investing, retirement and other goals.
6. Make a new budget – You may need to set a new budget and track your spending. A budget should not be static meaning that you shouldn’t just set and forget it. It will change over time and needs to be flexible enough to cater for unplanned expenses and emergencies.
7. Update Centrelink (if you receive financial benefits or support) – If you’re receiving any financial assistance such as family or childcare payments, then you will need to notify Centrelink of the change to your relationship status and circumstances. This can often result in a re-calculation of your entitlements. If you have had to move, or are renting and you receive certain payments, then you may also be entitled to rent assistance.
8. Review your super and insurances – You may wish to consult with your financial adviser who can assist you to review your insurances to ensure you have the appropriate policies and protection in place. You may also want to review your superannuation to ensure you are on track for the future. Another important task is to review and update the nomination of beneficiaries you have in place for your superannuation and any insurance policies.
9. Check your powers of attorney – If you have financial and medical powers of attorney in place then you may need to also review these. Always make sure that your power of attorney is someone you can trust, who is able to act on your behalf and understands your wishes.
10. Update your Will – Separating or divorcing does not cancel an existing Will (except in Western Australia), so seek expert advice about updating your Will to reflect the changes in your life and to ensure your estate ends up in the hands of your preferred beneficiaries.
Following these steps will mean that you’ll be well on your way to establishing a secure financial foundation for your future. Getting your finances sorted following a relationship breakup can be hard but like a lot of things in life, just focus on taking it one step at a time.
Finances can be a source of frustration and conflict between couples. If you find it difficult to work through with an ex-partner, it can be beneficial to work through these issues with a qualified counsellor.
If you wish to know more, please call us on (03) 5331 6550.