Ease the financial impact and be ready for your new situation

 

Going through a separation or divorce raises a lot of questions

One of these relates to money. Given you’re likely to have many other issues to consider, it’s important to focus on finances as early as possible. The sooner you sort out your financial situation, the easier it will be to adjust to your new circumstances.  

The financial effects

Studies have shown that women can often experience greater financial pressures than men after a relationship breakdown. For example: On average, it takes between six and seven years for a women’s income to recover to its pre-divorce level.1 In the first year of divorce, 60.1% of women experience at least one or more financial hardships, compared to 49.6% of divorced men.2 There are many reasons why women are more likely to suffer financial pressures. This can sometimes happen because women work part-time to accommodate family responsibilities. If less money is coming in, this can lead to women having less in superannuation. So it helps to make sure you’re prepared so you can look forward to your retirement.  

Impacts of relationships ending

When you separate from your partner you need to be prepared for an increase in costs and expenses. Keep in mind that these costs are only indicative and your actual costs may be higher or lower than those provided. Accommodation: If you need to move out of the shared home, you will have rental expenses or the costs associated with buying a new home. General living: Without a partner to share expenses with, you will be solely responsible for day-to-day living expenses such as groceries, car maintenance and utilities. Legal fees: You should consider using a solicitor if you are getting a divorce or have joint property that needs to be split, and fees range from $200 up to more than $600 per hour3. It is possible to keep legal costs to a minimum by deciding who gets what and keeping things as amicable as possible. Divorce application fee: The cost of filing for a divorce starts from around $8654, although this fee may be waived or reduced under certain circumstances, such as financial hardship.  

Getting your finances in order

After a separation or divorce it’s important to get your finances fully sorted to help ensure your future is looked after. To some this may seem daunting, particularly if you weren’t responsible for managing the family finances. But you can do it, and taking care of your finances will help you feel more independent and confident about the future.  

Short-term financial considerations

By taking care of the aspects below as soon as possible, it may make the property settlement easier and more favourable.   Freeze joint accounts Talk to a solicitor about whether you should freeze joint accounts or cancel any jointly held credit cards.   Gather together all of your financial information The financial information you should collect includes details of bank accounts, credit cards, superannuation funds, any investments, recent tax returns and your mortgage.   Take care of living arrangements If you were renting it’s a good idea to get the rental agreement changed. If you were living in a home that you owned either jointly or separately, you should seek legal advice as soon as possible.   Create a new budget This will help you work out how much you will have for things like rent, food, bills, clothes, petrol, savings, etc. If you’re not used to managing a budget, start by keeping copies of all your receipts and regular bills for a month or two.   Open your own bank account You should consider opening a savings account in your own name and organise for your wage, or any other income, to be paid into this account. You may also want to review the need for a credit card. If you’re worried about spending too much, a debit card might be more suitable.  

Longer-term financial considerations

To make sure that you can continue meeting your financial responsibilities and help secure your overall financial position, in the medium to long-term you should also consider doing the following:   Organise your will When you separate, or divorce, from your partner it’s a good time to update your will so that it reflects the changes in your life.   Take out insurance It is also a good time to think about insurance, including car, home and contents and life insurance. Life insurance is especially important if you have children. You should review any beneficiary nominations for your existing insurance policies.   Get your superannuation sorted You may want to look into splitting your partner’s superannuation interests as part of your property settlement. You may also want to review any existing beneficiary nominations to ensure they reflect your new circumstances.  

Speak to us for more information
If you have any questions, please call SMART Financial Planning for Life on 03 5911 7000.
Important information
This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. ‘Count’ and Count Wealth Accountants® are trading names of Count. Count advisers are authorised representatives of Count. Count is a Professional Partner of the Financial Planning Association of Australia Limited. Information in this document is based on current regulatory requirements and laws, as at 26 June 2017, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. Taxation considerations are general and based on present taxation laws, rulings and their interpretation and may be subject to change. You should seek professional tax advice before making any decision based on this information. Should you wish to opt out of receiving direct marketing material from your adviser, please notify your adviser by email, phone or in writing.
 

 

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