Becoming Financially Independent after Separation or Divorce
Most of us who marry don’t consider divorce to be part of our foreseeable future. If we did, none of us would marry! The mere thought of divorce can strike financial fear into the best of us – I currently know of several women who are desperately unhappy in their marriages, but won’t leave as they feel they would just not cope financially. I think this is tragic.
I’ve never been close to financially rich – but I’ve always had at least a grain of financial independence, and this independence helped me greatly during my divorce. A little background:
I’ve always had a job of some sort – even when my children were babies and toddlers I worked two to three days a week, not because I necessarily liked working, but because my husband and I weren’t in a position to live on his wage alone. I had a stable government job and leaving said job was simply not an option, even after I became a mother.
Of course, working when you have small children can be a double-edged sword. Working means you miss out on time with your kids. Not working means you are reliant on another person for money. I guess I was fortunate in that I was able to have a bit of the best of both.
I wasn’t with my kids every day, but I was with them more days than not. I wasn’t rolling in the cash, but I was able to have at least some financial independence.
And THIS is the option I would recommend for any married or partnered woman on the threshold of starting a family. If at all possible, don’t give up your day job completely. Research employment options. Consider part-time work during the early years – even a few hours per week can be enough to keep your foot in the door, your skills up to date, and give you a sense of financial autonomy.
I know that this is not a viable option for every woman, and I know that some won’t agree with me, but I have seen far too many women completely bamboozled and/or devastated by the financial impact of divorce – or other sudden life upheaval. Having said all of this, there are some basic steps you can (and need to) take to sort out your finances if you are preparing for separation or divorce.
Undertaking these FOUR things, at a minimum, will ensure that you are in the least vulnerable position possible. For more tips check out my eBook:
Becoming Financially Independent after Separation or Divorce:
1. TAKE INVENTORY OF YOUR ASSETS AND DEBTS
It is important that you have an understanding of your current financial position – ie. what you have, and what you owe. For this, you need to make a list of all of yours, and your ex-partner's, assets and debts.
Interestingly, a lot of people are not aware of all of the things which could be considered an asset when it comes to the division of marital property (hello, Superannuation). Below is a simple table to help you with the process, including some ideas of what may constitute as an asset or debt for you.
In the example below, the current financial position, or net worth, of this couple can be calculated by deducting the total debts of $313,900 from the total assets of $1,037,000, to arrive at the figure of $723,100 net worth.
This is important information to have when you are negotiating a Property Settlement further down the line.
2. CREATE A BUDGET
Sit down with a pen and paper (or better, start a simple spreadsheet on your computer or laptop) and start thinking about money. This may not be fun, but it is absolutely imperative. Once you know what's coming in and where it's coming from, as well as what's going out, you can start to gain a bit of control over your immediate future. (There are also plenty of budget planners and templates to be found online to help you with this step).
Income and other sources of cash
The first step is to record the money you have coming in. Here are some common income sources:
Your own salary/wages - What you are earning, after tax
Social Security – Your Social Security/Centrelink payments
Child Support – Your Child Support payments
Other income - Do you have any secondary or other sources of income or cash, besides your primary job? This may include income from any savings or investments. If so, record this.
Outgoings – what you must spend money on
The second step is to record your outgoings. Here are some common outgoings:
Mortgage/Rent - Your share of this
Household bills - Electricity, Gas, Water, Council Rates, Phone
Insurance - Car, Home, Contents, Health, Personal, Life
Education - School fees, child care, school uniforms, text books etc
Groceries - Food, toiletries, cleaning products
Transport costs - Petrol, public transport expenses, tolls, parking, car maintenance/registration
Maintenance costs – house, car
Any loan/debt repayments - Credit cards, store cards, personal loans. Better not to be adding to your debt at this time – now is the time to get rid of outstanding liabilities.
Superannuation contributions – what you put into your Super, other than your employer's compulsory contributions.
All of the things I've listed above are what I'd consider to be more or less essential. Here are some things that I'd consider non-essentials – things that you may consider dropping, if needed, either immediately or in the future. Even if you don't feel the need to give these things up now, it is nice to know that there is room and potential for savings should the need arise.
Gym or any other club membership fees
Pay TV subscription
Magazine /Newspaper/any other subscriptions
Home phone/internet bundle
Restaurant meals, home deliveries, entertainment expenses
So, now you know your incomings and outgoings, tally them up in your spreadsheet or notebook and see what you have. Your incomoings, less your outgoings, is what you have left to live off, or play with.
Do you need to look at further sources of income in the future? Or, can you cut back on some of your outgoings (as mentioned above)? Can you move to a cheaper house or area? These are all things you may need to consider, but at least you now have a clearer picture of your financial situation, and are therefore in a good position to make informed choices.
If you are struggling now with debt, or just need a bit of advice on how best to handle your finances and debts, consider some Financial Counselling - this is a free service offered by several community organisations. Do a quick search online to find someone near you. If you are struggling to meet debt repayments, talk to your lender or credit provider ASAP.
WARNING – Take extra care if signing anything or making any important FINANCIAL or LEGAL decisions in the very early days of your separation/divorce
This is because you are very possibly in a state of grief. If the separation was something that you had planned for and wanted, your grief won't be as palpable as someone reeling from the shock of being left, but, no matter how you got to this point, you will to some extent be in a different frame of mind to your regular state.
In the week that my husband unexpectedly left, he made changes to our mortgage which required my signature. And, I was in no fit state to sit down and read a lengthy mortgage document. In the end, I got some help from a friend with the document and eventually signed it. Lucky enough for me my ex is a trustworthy person, and what I was signing was legitimate. But that is not the point here. Protect yourself.
DO NOT SIGN ANYTHING UNTIL YOU ARE 100% SURE IT IS REASONABLE AND LAWFUL
3. DEAL WITH YOUR BANK ACCOUNTS
If you don’t already have one, open a new account in your name only. Have your pay (salary/wages) and any Social Security/Centrelink benefits paid to this account.
Consider closing any joint accounts and credit cards. Note though that the outstanding balance on the account or card must be zero, and both owners need to agree on the closure. If an agreement is not possible with your ex-partner, contact your bank – they may be able to either freeze the account, or put joint authorisation restrictions on it. Make sure you deal with any direct debits before taking any action on these accounts. Similarly, consider stopping any mortgage redraw facilities, or again ask your bank to place authorisation restrictions on the account (ie. joint signatures for withdrawals).
Change any PINs or online banking passwords to protect your funds.
4. LOOK AT YOUR MORTGAGE/RENT AND YOUR UTILITY BILLS
If you have a mortgage you may need to contact your lender to inform them of your separation. If possible, come to an agreement with your ex-partner regarding mortgage repayments during the property settlement period. Ideally, you will both be able to continue with your normal repayments until a decision has been reached on whether the property will be sold or retained. If there is a possibility that you won’t be able to make a repayment, contact your lender immediately (preferably before any nasty letters arrive in the mail).
If you are renting and you leave the shared home (with your ex-partner staying), have your name removed from the lease. Likewise, your ex-partner’s name should be removed if you stay in the shared home.
Lastly, whether you are renting or have a mortgage, update the contact names on your utilities. If you are leaving the house, have your name removed. If you are staying (with your ex-partner leaving), have your ex-partner’s name removed. You may be liable for any unpaid bills if you don’t attend to this.
This is an edited extract from my eBook Separation & Divorce - Everything I Wish I'd Known as a Woman Going Through it. The book can be purchased HERE.
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