With isolation and social restrictions in place, many experts warn that we may see an increase in divorce, as relationships that were already strained break under the added pressure of “lockdown”. Regardless of the circumstances, the end of a long-term relationship or marriage is something we usually don’t factor into our life or our financial plans. Whether the end has been coming for some time or it has come as a shock, it’s an emotional time for all parties.
In this heightened emotional state, it can be hard to think logically and make rational decisions. However, to protect your financial future and your lifestyle, it’s critical that you take action as soon as possible.
As a financial adviser, I work with clients who are experiencing relationship breakdown to help them navigate their financial situation and plan for the future. One of the biggest mistakes I see is people making snap decisions with no plan or direction that can impact their financial situation for years to come.
Here are my tips for surviving divorce from a financial perspective.
- Document your financial situation
While it is critical that you document your current financial situation, it can feel like a daunting task. To help my clients gain some clarity and make the process more manageable, I often tell them to think about this in four segments; what do you own, owe, earn and spend.
- What do you own? There are some obvious physical assets to consider, such as the family home or car, but you should also consider assets like your superannuation, share portfolios and, of course, money in the bank. These can all form part of any future settlement, so it’s important to have the full picture. It’s also important to think about who has access to what, such as bank accounts or credit cards that are in joint names.
- What do you owe? From the mortgage to your credit cards, personal loans and finance, what are your liabilities and whose name are they in?
- What do you earn? Your employment income is the obvious one here, but you should also factor in other sources of income such as share dividends or rent on investment properties.
- What do you spend? What do your weekly outgoings look like? It can be helpful to use a budgeting tool, like the one on the Apt Knowledge Centre. (If you don’t already have access to this financial hub, you can request it by emailing firstname.lastname@example.org).
- Plan for your new circumstances
If you have been on a journey towards the end of the relationship for a while, you may have had time to consider what the future might look like. For others, it may be a sudden change. Regardless, it’s important that you start planning as soon as possible.
A key part of the planning is to understand what your new lifestyle and the transition to it will cost in dollar terms. This includes your everyday lifestyle costs and any additional costs you might incur, such as relocating or buying a new home.
Some costs that were shared and now need to be covered solo may increase, others may stay the same, and some may decrease or disappear. It’s important to have an accurate picture so that you can use this information to inform decisions as you go through the process of separation, legally and financially. Having more certainty about what the future looks like can help you deal with the emotional transition too.
- Get expert advice as early as possible
From your lawyer to your financial planner, engaging expert advice early on in the piece can help you navigate the situation and, ultimately, reach a better outcome. The experts you have in your corner can advise you with a clear head and a complete understanding of your current situation and your future goals. It’s best to start building your team from the get-go. Leaving this too late, to when decisions have already been made, can put you at a disadvantage.
A financial adviser can also help you navigate the changes you will need to make to your life goals and financial structure. From your superannuation to your insurances, beneficiaries and estate planning, expert advice can make sure you have every box ticked.
At the end of the day, divorce is a stressful and highly emotional situation. When it comes to your finances, it’s critical to begin planning at the earliest possible time and keep a clear head or engage experts to guide you through the process and avoid emotional decision-making.
Life after your divorce may be different to the one you originally planned for, but with a little preparation and the right advice, there’s no reason it can’t be a fulfilling, happy and financially secure one.
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General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain