People are usually prompted to focus on financial issues when they experience a significant life event such as a career or income change which may spark a person’s interest in their finances.
A marriage may prompt a couple to consider longer term investment goals. The birth of a child or taking out a mortgage may motivate others to do something about their life insurance.
Divorce is another such life event that can prompt action and consideration about your financial future. While it is not a pleasant life event, divorce does present a range of financial challenges that require thought and action in your personal financial planning.
The cost of divorce can be a huge financial drain, making it even more important to be focused on your finances and seek assistance to review your personal finances. The focus of a divorcee is generally on getting finances moving forward after the divorce is settled.
If you or someone you know is going through divorce, here is a checklist of some of the issues to consider, which may include some of the following.
Budgeting is critical
Day to day financial circumstances will inevitably be different for both parties after the divorce. Child support payments, a previously stay-at-home parent taking on paid employment, changes in accommodation and the need to run a household on less income may all come into play.
These factors highlight the importance of looking at personal budgeting and managing expenses in-line with available income.
Updating your Will and estate planning arrangements
It is unlikely that the Will you had when you were married will reflect your post-divorce wishes. Review your Will and other estate planning arrangements, such as your Power of Attorney, as soon as possible. It is essential your wishes are expressed in a formal way. This is a key area we recommend seeking professional advice as it can be a complicated and emotional process.
Re-investing liquidated assets
In many cases assets, such as a family home, will have been sold and proceeds divided. This may result in relatively large sums of money that need to be managed, beyond what you may have previously experienced. One of the big concerns facing many individuals after divorce is how to get back in to the property market and any related tax implications. These issues may have a major impact on your future financial health so this is an area you can benefit from some professional advice and we work with professionals who can assist in this specialist area.
Social security benefits
Now that household income is split, you may be entitled to social security benefits that were not previously available to you. Benefits such as Parenting Payment and Child Support need to be considered in order to boost your income.
Another consideration is if any life insurance policies nominate your ex-partner as a beneficiary. Apart from resolving any such issues, you may need to review levels of cover to ensure you have sufficient insurance to cover your post-divorce responsibilities. Conversely, you may have too much cover in your new circumstances and therefore have the opportunity to scale down cover and divert funds to other spending or investment opportunities.
Superannuation generally forms part of the overall property settlement in a divorce, so both parties need to re-assess their superannuation and retirement funding. Depending on your age, you may need to take decisive action on your retirement funding and how much super you will need.
While divorce is rarely without emotional upheaval, it can be a time to re-focus on your future lifestyle goals, once the dust settles. After some of the more fundamental issues are dealt with, you can then focus on a plan to re-build your wealth and financial independence. This is a key time to engage a financial adviser to discuss your options and opportunities.
A good time to lean on some sound advice
At a time of significant challenge, it is our experience that many divorcees find the advice and support of a financial adviser to be invaluable.
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RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This information does not consider your personal circumstances and is general advice only. You should not act on any information without obtaining professional financial advice specific to your circumstances. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances. This article contains information from sources believed to be accurate at the time of writing. This information may be or may become inaccurate. You should seek your own timely financial advice on the contents of this editorial and not rely on this as advice from the provider.