04 Feb Financial Divorce Advice
Principal of Justice Family Lawyers, Hayder specialises in complex parenting and property family law matters. He is based in Sydney and holds a Bachelor of Law and Bachelor of Communications from UTS.
Divorce normally means that you will be making a number of life-changing decisions.
After a divorce, both spouses will most likely find themselves with less money than what they enjoyed before as a couple.
This makes the divorce process a difficult transition and will require a reassessment of current lifestyle choices, adjustment to the new circumstances and coming to terms with prior plans falling apart.
1. Bank accounts and credit cards
Take stock of all joint accounts, separate accounts and credit cards that you have.
We advise that you close joint bank accounts and joint credit cards. This prevents one spouse from racking up huge debts or withdrawing money without your knowledge.
Change all of the passwords on your accounts and bank cards as these may now be compromised.
Open up a separate account and a separate credit card under your sole name.
If you own any property, ensure that your legal interest is not compromised by potentially placing a caveat on the property.
You should get legal advice before doing this.
If you have worked out a financial settlement and you previously held a property in joint names and want to remove one of the names on the title, you can do so without having to pay stamp duty.
If you decided to go down this path, you should speak to your bank or financial lender about refinancing the mortgage under the new owner’s name.
For those who are renting a property and you have decided that you are going to no longer live at the property, ensure that you contact the agent to remove your name from the lease.
At the same time, ensure that your name is no longer on any utility bills in relation to the property.
3. Take stock and start planning
After a relationship breaks down, you must come to terms with what your new financial future will look like.
In order to manage your situation, we recommend that one of the first things you should is to create a financial plan.
In order to begin financial planning, one must first understand and know their current position.
Like with everything in life, you can’t manage what you can’t measure.
We recommend that you put together a spreadsheet that includes financial information such as bank accounts, credit cards, mortgage repayments, life insurance, weekly expenses, bills and so on.
A spreadsheet will make the information easy to digest.
A helpful tool that can use is the ASIC stocktake calculator that allows you to take stock of what you actually own.
After gathering basic information on the accounts, it is easier to make further detailed notes on the different accounts, such as the various interest rates.
Prior to divorce, your financial goals would have looked different.
They might have included planning for your shared retirement.
However, after divorce, the separation of shared finances means you should now re-consider financial goals that are feasible for the new situation.
This might include holding off on former long-term savings goals for more short-term strategies that allow you to handle your current situation first.
Physically writing down your financial goals post-divorce will allow you to envision your new priorities.
What is most important to you financially is a personal question that is unique to each individual and their circumstances.
Financial Divorce Advice
Now that you have your goals in place, start working towards them.
Financial Advisors coin this practice as ‘financial flow’.
After gaining an understanding of your current financial state and envisioning your financial priorities, this will guide your financial habits and actions.
This keeps you motivated to achieve your new financial goals.
Figure out how much you’ll need to put away every week to and where your cost-cutting will come from.
Don’t be upset if you feel like this is all overwhelming.
The clearer your financial goals are, the easier it will be to work toward.
Will divorce affect my retirement?
A lot of divorces occur after the children of the marriage have grown up and become adults.
This means many men and women divorce in their forties and fifties, and in doing so, consider the impact of divorce on their retirement plans.
As lessened financial resources are a reality after divorce, many couples consider staying married for the sake of preserving long-term plans.
However, this ‘scarcity’ mentality can be damaging to one’s mental health if they are subjecting themselves to a relationship they no longer wish to be in.
By having a flexible and open attitude to re-prioritising financial goals, divorcees can make adjustments to lifestyle or work and come up with a new projected retirement lifestyle.
This may mean that if one party had been accumulating a large amount of super during the relationship, then that party may have to split their super with their spouse to ensure that both of you have something to retire on.
Financial concerns are a reality after divorce, but can still be managed effectively if each party plans ahead.