Most couples don’t plan for divorce, but the fact is, one in three marriages in Australia end. It’s a financial stress that most people aren’t prepared for, but when it does happen they want the process dealt with swiftly. There are no winners in a marriage breakdown, but you do need to take the time to set yourself up financially for the future. The last thing you want is to look back in five years’ time and realise you short-changed yourself.
It is no secret that financially most couples are not equal. With almost half of divorcing couples having children (47.5%), it is highly likely that one partner has taken time out of the workforce. Whether it is for short-term parental leave or longer, this can have a significant impact on their current financial situation and future earning capacity. We just need to look at the numbers around superannuation, with women expected to retire with $200,000 less super than men .
The average age of divorce has gone up over recent years, with the median age for men and women being 45 and 43 years respectively. There has also been a rise in couples divorcing in later years known as “grey divorce”. This often occurs when children leave home, or the couple enter retirement and start spending more time together, only to realise they’ve grown apart or lack common interests. For others it could be involuntary, with their spouse finding someone else. Often grey divorce creates a more complex financial situation than it does for their younger counterparts, as their days of wealth creation are far behind them.
A common situation we see for divorce in this age group is where one partner was the sole or primary income-earner, and potentially controlled the couple’s finances, throughout the marriage. In contrast, the other partner spent 20 years raising children. These circumstances create an uneven financial situation.
If you are considering divorce or your marriage has broken down, here are four tips that may help you to survive financially:
1) Get expert advice
Selecting the right professional partners to guide you through this process is paramount. No matter how amicable your divorce, having an experienced, unbiased professional looking out for you and your best interests will help reduce stress and ease the burden. A good family lawyer is a first step, followed by an experienced financial planner to help get your finances in order and prepare a plan for your new future.
2) Understand your finances
One of the most challenging aspects of divorce is sorting through the finances. It is fundamental that you understand your current financial position. Once done, you can set your financial goals and plan how to achieve them. You need to consider your earning capacity and expenses to create a cash flow plan that will support your lifestyle.
3) Think beyond the family home
Most often the biggest assets to divide in a divorce are the family home and superannuation. A lot of focus (and angst) is spent on reaching a settlement on the family home. Of course, this is important, but often it comes at the expense of other substantial assets, such as superannuation. With women already expected to retire with significantly less superannuation, time out of the workforce and future earning capacity need to be taken into account. How this asset is divided should not be overlooked.
4) Insurances & Estate Planning
Following the breakdown of a marriage, many people re-evaluate who should benefit from their estate in the event of their death. Discuss updating your will and power of attorney with your lawyer to ensure that your interests are protected, and that your intended beneficiaries will benefit from your estate. Additionally, update insurances to ensure you and your loved ones are still protected appropriately.