Tackling the conversation of finances when going through a separation or divorce can be challenging. Having a clear plan for how you approach these conversations and establish your financial independence can help.
Going through a separation or divorce can be a stressful and emotionally-charged time, particularly when it comes to conversations around shared finances and the division of assets. Having a clear plan for how you approach these discussions can help provide direction and ensure you reach a fair solution that everyone is happy with. As you work through this process it is also a time to prioritise your individual goals and establish a plan for your financial future and that of your family.
Set yourself up for financial independence
The process of dividing assets can take some time, so in the first instance, it’s important to set up bank and credit card accounts in your own name so you have the freedom to manage your own finances day-to-day. Take the time to review any direct debits or deposits you may have set up on shared accounts and redirect these to each individual’s new account for example your wage, monthly phone bill, or Medicare repayments. Reviewing previous bank statements can help to identify any direct debits you may have set up.
Establish a clear picture of your shared finances
The next important step is to capture a clear picture of what you own together and the value of each. This document can not only help guide discussions around how to fairly divide assets and liabilities but can provide a helpful checklist for things you may need to address such as closing shared bank or credit card accounts, reviewing your insurance policies, or accounting for any debts or commitments that will continue to need to be paid. This list could include:
- Savings accounts
- Credit cards
- Property and other assets
- Life insurance, income protection or TPD policies
- Debts and liabilities
- Household items and possessions - furniture, art, appliances
There are a number of nuances and complexities to consider when dividing assets particularly when it comes to superannuation and taxes relating to property. A financial adviser can help provide guidance on the different considerations when dividing these assets. We can help you find an adviser to best suit your needs.
Financial considerations ongoing
Everyone’s relationship and circumstances are different and when going through a separation or divorce it’s important to come to an arrangement that’s right for you, and for some, this will involve an ongoing financial relationship. This is commonly the case if you have children, as you will need to agree on where the children will live and how you will manage and share their living expenses ongoing. For many, this means that one person will remain in the family home which is something that should be considered when mapping out your shared assets and liabilities. When considering how you will share your parenting responsibilities it’s also worthwhile looking at the insurances you have in place to protect them ongoing. Whether that’s life insurance to provide for them if something were to happen to you, or income protection and TPD insurance to provide a source of income if you were temporarily or permanently unable to work due to an accident or illness.
Taking control of your finances following a separation or divorce
A separation or divorce is a time to take control of your finances and set yourself up with a budget that’s based on your individual income, expenses and savings. If you have shared the management of your finances up until now it may be helpful to seek the advice of a financial adviser who can help you establish a financial plan built around your independent goals.
What’s important as you make these adjustments is that you feel empowered and in control. As one of the biggest shifts in your finances may be moving to a single income, part of re-evaluating your financial plan should be to review the protections you have in place. An important consideration is how you would manage your day-to-day expenses and financial commitments if you were unable to work. Income protection insurance can provide a source of income if you are temporarily unable to work, leaving you to focus on your recovery. And as you plan for the future, consider how you would continue to support your family if something were to happen to you. By having life insurance in place you have the peace of mind that your family will have the financial support they need even after you’re gone.
As you establish your financial independence and revisit your individual goals, consider the protections you have in place to protect you and your loved ones.