Separating? 5 commonly overlooked money issues you need to address
Amid the heartache of a relationship ending, it’s easy to overlook money, legal and logistical matters or make poor decisions on the fly.
However, that can bring more pain – even years down the track.
When a relationship ends, you have the chance to embrace your new-found independence and do things for yourself. Including managing money.
Make the most of this freedom by taking charge of your financial affairs, starting with these aspects that commonly get neglected:
1. Split finances and expenses
Separating finances is an important first step. Otherwise, your savings could be pilfered or you could be held liable for your ex’s debts and spending.
Be thorough – smaller things are especially easy to miss. That includes store cards, utilities, subscriptions, memberships, as well as loans and credit cards.
Some could be cancelled; others may need to be retained, in which case they should be changed into just one name. Don’t leave it up to your ex to take your name off anything.
Redirect your payments and direct debits to your personal bank account to avoid penalties for missed payments. Update details with your employer for your salary (and superannuation, if necessary) to be paid into.
2. Update estate planning
The next step is to look at your estate planning. Failing to do this means your ex could receive an unexpected windfall should you pass away – at the expense of loved ones you actually want to support.
Update your will to reflect your new situation as well as the beneficiaries in your superannuation – which is treated separately from your will.
The same goes for any trusts, companies, or similar structures you have.
3. Get your best settlement
Many people – especially women – settle for less than their fair share in a separation. Why? Some don’t realise their real worth or legal entitlements. Others just want to get it done with quickly.
While it makes financial sense not to drag things out due to spite, your future quality of life and retirement depend on how much you walk away with.
Among the factors to consider are:
- Superannuation: you may be eligible for part of your ex’s super because it forms part of the joint asset pool. This is especially valuable if you earned considerably less or had time out of the workforce to raise children or care for relatives.
- Custody: supporting children and pets obviously impacts ongoing living costs. Child support isn’t necessarily guaranteed.
- Your home: is this really worth keeping at all cost if you won’t be able to afford it on your own?
- Sale time: if you separate on good terms, do you really need to sell assets now? Could you keep them to maximise value jointly or sell later at a better price?
Ensure you get pre-settlement financial advice BEFORE you sign on the bottom line.
4. Live independently
You’re now on one income. Economies of scale (most things cost less per person when you’re coupled) no longer work in your favour. Taking time off work may be harder.
So, don’t keep spending like you used to. Be proactive in adjusting to your new situation.
Make a new spending and investment plan (a nicer and more comprehensive version of a budget). See what you can and cannot afford and make necessary cuts. Update insurances, subscriptions, and utilities to ensure you’re only paying for what you still need.
Set up an easily accessible emergency fund, to cover you should you lose your job or face an unexpected crisis.
Tailored advice from your financial adviser can help you make the most of what you have – for now and the future.
5. Be wise in love
It may be the last thing on your mind amidst a separation, but a new relationship could be in your future.
Learn from your current separation and take measures to protect your future self.
A pre-nuptial agreement (pre-nup) could be useful to protect your assets. Or a post-nuptial agreement if you already have a new partner.
Carefully consider co-habiting arrangements – your place, their place, a new place together? Who contributes what?
Even if you don’t ultimately need them (fingers crossed!), the peace of mind from having protections in place will make any new relationship feel that much sweeter.
Image credits: Getty Images
Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au