Guest post by our Certified Financial Planner,
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According to the Australian Bureau of statistics, 46,604 divorces were granted in Australia in 2016, with most of the people involved being in their mid 40's. Even though Australians opinions on divorce have evolved to become more accepting, the divorce rates have been steadily dropping since the 1980's.
There are still approximately 132 divorces in Australia every day, so for Financial Planners this is something we come across all too often. There are still clients who need to be guided through the often-complicated financial component of their separation and then onto their future and retirement.
We understand it is a particularly stressful stage in life, so I have put together a few general tips I share with my clients in the event they do choose to go separate ways.
Believing your lifestyle will stay the same
The same income from before the divorce is now paying for two household and two sets of bills. This in turn for some, makes it more difficult to maintain the lifestyle from before the divorce. Priorities need to be reassessed, whether it be social, professional, family or financial.
The financial and legal implications of divorce lead to many hurdles individuals need to overcome. People who have been stay at home parents might have to re-enter the workforce to re-establish themselves and their family.
Avoid making decisions fuelled by emotions
Making decisions in the heat of the moment can be a dangerous thing as there can be long term effects from short term emotions. While emotions are important for decision making, logical rationality tends to result in more successful, objective and considered choices with a better outcome for the long term.
Create a new budget
As we mentioned earlier, the income servicing the married pair has now got to stretch to service two households, so cash flow is likely to change. To make sure the bills will be paid, create a new budget. In the early days use the minimum you may be living off as a starting point. From here you can make choices around employment, living arrangements and other financial priorities. Nothing is certain in a divorce, so planning from a minimum ensures you are setting yourself up for success once the divorce settles. While the chaos of the divorce is happening at least something will be under control.
Debt isn’t something that magically disappears overnight. If you can, come to an intermediate arrangement about who is responsible for any joint debt. Like your assets, your debt will be divided up depending on your individual and family circumstances.
Take control of your insurance, investments and assets.
Taking control of what you can during this chaotic time can provide a certain level of stability heading into your future. As soon as you can, start keeping a record on what you are spending on previously joint responsibilities to determine the split of assets.
Organise your Will, any investments and assets that are in your name and make sure any joint insurance and your superannuation death benefit nomination is restructured to reflect your new situation. A Certified Financial Planner can help guide you through this process as it can be quite complicated and time consuming finding the best options for your current and future situations.