Anthony Bell gives us the low-down on how to keep our financial heads above water after a divorce.
Do not underestimate the psychological impact:
Regardless of the circumstances of your separation, it is inevitable that feelings of loss, failure and sometimes anger will appear to varying degrees. Recognising these and seeking help from family, friends and professionals is critical to your recovery. It is also very difficult to take informed unemotional decisions that will be best for your financial future whilst these feelings pervade.
The Divorce process itself:
This is a topic in its own right, suffice to say that you should want to achieve a fair financial outcome for you and your former spouse. You will need legal representation. Talk to people you trust to refer you to a lawyer that will look to achieve a fair outcome for you with as little aggravation and cost along the way. There are lawyers out there that will push you to “assert your legal rights” even if it means expensive litigation. Remember, it is a fair outcome you’re looking for not a “victory”, with as little pain along the way as possible.
Avoid the temptation to use the process for some form of vengeance or retribution; the lawyers will win and you and your former spouse will both lose. This is even more important when children are involved as inevitably you will still need to at least have some form of hopefully positive relationship with your former spouse once all the financial mess is sorted.
The best outcomes we see are usually where the couple themselves are able to come to an agreement in an amicable way which is then reviewed by their legal representatives for any major issues that might have been overlooked and then documented into a binding financial agreement.
Assuming the financial separation has been completed, you then need to think about:
Complete a personal balance sheet:
Before being able to move forward, you need to be realistic and accurate about your personal assets and liabilities post the divorce. Completing a personal balance sheet where you write down what you own and what you owe is a great start. You also need to be clear about your income and expenditure going forward and single income earner.
This is where using the services of a financial planner is a good idea as he or she will be able to help you plan for the future without any of the emotional baggage that understandably will be with you personally.
Joint Accounts & Insurance:
Be sure to close down any joint bank accounts and credit cards. Also check your insurance policies to be sure that any in joint names are altered and the beneficiaries of any policies are also changed. This is particularly important when it comes to health insurance and life insurance.
Wills & Superannuation:
You will need to complete a new will that takes into account your new circumstances.
Check your superannuation; have you completed a binding nomination which deals where the trustee of your superannuation fund must distribute your super funds in the event of your death? If so, this will likely need changing. If your super contributions go into a self managed superannuation fund where your former spouse is also a member, you will want to move the balance into a new fund. Your financial advisor will be able to help you here to assess whether this should be a new self managed fund, an industry fund or a public offer fund.
Be aware that it is likely that your super will have been dealt with as part of your collective assets during the divorce process.
Be sure that any other assets such as motor cars, property and home contents where agreement has been reached to change the ownership are actioned. The sooner you can deal with these practical matters the sooner you can begin to move forward financially.
Saving:
Of course this may not be easy, but if you can, try to build some savings, no matter how modest. Seeing the start of something you have achieved yourself will make a massive difference to you, and not just financially.
Be realistic:
This can be the hardest one of all. In most cases couples will naturally have twice the earning power. In the long run you will be far better off if you can adjust your lifestyle to reflect your changed circumstances. It often will feel like you’re going backwards, but it will be the start of a new life with new possibilities, but you must address the financial aspects of your new life as part of your total recovery.
For professional assistance: www.bellpartners.com
