Moving financially forward after a relationship separation
Relationship breakdowns can be extremely hard and having to rebuild and recreate your new life can seem overwhelming and sometimes a little bit impossible but it’s not.
And while relationship breakdowns can often take a toll on our emotional well-being, they also take a big hit to your financial well-being. A study done by Westpac showed that two-thirds of Australians who were considering separation were hesitant to separate due to the fear of having to start over financially.
So clearly, it is a financial stress for a lot of people. So how do you kickstart your new-found financial independence and get your new life off to the best possible start?
Here we share six tips to help you!
Tip #1 – Get to know your finances
In many relationships, it is common for one partner to take control of paying bills and managing day-to-day finances. If that wasn’t you, having to understand the financial position and now run day-to-day management can be overwhelming.
The first step is to gather any important financial documents relating to all your bank accounts, loan accounts, debt facilities, basically any debt facilities or bank accounts that you have jointly. You also want to look at all your personal loans, any credit cards, superannuation statements, details of all the investments that you have, including any shares and property.
If you’re not sure of the ownership of the properties that you and your ex-partner held then it’s a good idea to undertake searches of the properties and get copies of the titles. And if you or your ex were self-employed you also need to get copies of accountant prepared financials and personal and business tax returns.
Now once you have all the documentation you can start summarizing it into a one-page list, showing all your assets and all your debts that you and your spouse had before separation.
Tip #2 – Protect your privacy
Obviously, things are different to what they were, so you need to start protecting your privacy and making sure you are looking after yourself. Create a separate bank account and update all your passwords on your bank accounts, computers, email, phone and change your pin numbers on your cards.
If you do have joint bank accounts or loan accounts, consider setting up dual signatories so that both of you must sign to withdrawal money to avoid one of you taking money out without the other person knowing. It’s also a good idea to talk to your ex about removing yourself from joint accounts and credit cards.
If you know that your partner is going to take over a credit card, then remove your name from that facility. You also need to look at all the bills that you currently have in joint names like your water, electricity, any other household bills to reflect which person will actually continue to have the financial responsibility of all of those bills following the separation.
We also encourage you to update your will and make sure that your superannuation and insurance beneficiaries are updated to reflect what you’d like to happen with those monies moving forward.
Tip #3 – Understand your entitlements
Contact Centrelink, find out if you’ll be eligible for any financial assistance, understand any child support you may be entitled to so that you can really know what financial position you will be in from a cash flow perspective moving forward.
Tip #4 – Prepare a spending plan
Review all your existing expenses that you had as a couple and work out which ones you’re now going to be solely responsible for. It’s a good idea to go through the past 12 months bank and credit card statements to work out your spending in each expense category.
Whilst this might seem a big task, once you get into it, it doesn’t take that long and it can really help you to understand where your money is going. You might even be able to identify potential future savings. It will give you a good grasp on what expenses you will have moving forward.
We encourage you to outline all your income including your Centrelink payments, any child support, and all your potential expenses in your new-found life. If this process seems overwhelming reach out to a professional to help you. For example, a money mentor or financial planner can sit down with you and do it together. If you would like to know more about our Rise High Money Mentoring program, take a read here.
Tip #5 – Tackle any joint debt and divide your assets
In an ideal world, you and your partner would be able to discuss the division of assets in a friendly and harmonious way. However, this is not always the case. In having these discussions with your ex-partner get the support and advice from your lawyer, who will be able to guide you. It’s also a really good idea to meet with your mortgage broker so that you can understand your individual borrowing capacity and what level of debt you can afford to take on.
This is especially important if you’re hoping to keep the family home and take over the mortgage. Also, make sure that you and your ex-partner have a plan to pay off any joint debts. For example, if you’ve got any credit cards or personal loans that are still lingering around following the separation. Make sure you know who’s paying what and you’ve got a plan to repay those debts as soon as possible.
Tip #6 – Upskill and build your team
While it might feel overwhelming now, the good news is building your financial confidence will also build your general confidence so it’s important to upskill as soon as possible. There’s a lot of great finance information, courses and resources on the internet, the Money Smart website is a good place to start as is the Rise High Investor website.
Build your team of experts around you. This could include a good mortgage broker, an accountant, financial planner, a money mentor, or friends and family that are good at managing money.
It’s important to surround yourself with the information, the education, and the people that are going to help you take positive steps in your new-found financial independence.
Finally, just like to leave you with the idea that you do have this, you’ve got this. Just take it one step at a time and you will get through this. It will be a difficult period, but you will come out on the other end and really enjoy your new-found financial independence.