Achieving financial stability after a divorce can be daunting, but taking control of your finances will put you in the optimum position to achieve your new goals.
When dealing with the emotional upheaval of going through a divorce, having to think about your finances can feel like the final straw. However, the financial effects of divorce can be devastating, and have to be faced: not only is ending a marriage costly in itself, but many women will no longer own a home, will find that their savings are halved and may also have to pay child support.
Getting your finances in order requires careful thought, planning and, inevitably, some degree of sacrifice. As a divorced woman your expenses will increase, which will affect how much you are able to save. Yet if you can rise to the challenge, seeking sound financial advice and accepting that you will have to make some lifestyle changes, it is possible to rebuild your net worth.
NOW IS THE TIME TO TAKE STOCK
Although it is tempting to delay taking stock of your financial situation, taking the first step in securing your financial future following a divorce can be a valuable lifeline. Using the services of an experienced financial adviser is recommended as they will assist you to consider your finances in an objective manner, which is easier said than done in the heat of divorce. A good financial adviser will explore the range of options available to you, and then help you to formulate a plan to ensure your long-term financial stability and wellbeing.
A robust financial analysis and plan can be invaluable during divorce mediation, as it gives both parties an accurate, impartial picture of their financial obligations. Not only will this save time – and time costs money where professional services are involved – but it will also ensure that you haven’t underestimated your financial requirements.
EVALUATE YOUR LIFESTYLE
Accurate information is needed in order to put together a viable plan, so you must ensure that you have a good understanding of:
- Your personal finances (your income and expenses, both fixed and variable).
- Your future cash flow requirements (for instance replacement of vehicles, or more comprehensive medical cover).
- Your financial obligations to minor children.
Bear in mind that expenses increase following a divorce. You alone will have to bear costs that were once shared, and downsizing your home might be necessary in order to manage this. The cost of childcare may also have to be taken into account, as it can increase significantly if both parents are working.
When putting together a budget it is useful to highlight areas in which you are able to reduce your expenditure or, conversely, increase the income earned. Considering a range of scenarios dependent on potential settlement outcomes will give you a better understanding of what to expect and how best to plan accordingly.
It is also advisable to take stock of your estimated financial position when you retire; understandably, you will be focused on the immediate implications of your divorce but it’s important to think about your long-term wellbeing too. If you are approaching retirement age then it is imperative that you protect your capital, and if you are younger it is essential that you manage and grow your investments. This will give you the best chance of securing a comfortable retirement when the time comes.
Of course, you may remarry in the future, which will reduce your financial burden, but you should plan under the assumption that you will remain single (this is good advice for all women, whether or not they are going through a divorce).
Achieving financial stability after a divorce can be daunting, especially if this requires making sacrifices. Do try to look on the positive side, however: it is upsetting when a marriage fails, but embarking on a new phase of your life can also be empowering. Taking control of your finances will put you in the optimum position to achieve your goals as you move forward.
Post-divorce, you must review the following:
- Your will. It is likely you will need to have your will redrafted to take your new circumstances into account. If your children are minors, it is a good idea to consider the creation of a testamentary trust, should either parent die before the children are in a position to inherit or manage their own finances. You and your ex-spouse must also decide who will take on a guardianship role in the event of you both dying while the children are still minors. It is imperative that this choice of guardian/s is written into both your wills.
- Your beneficiary nominations on all policies and investments.
- Death and disability cover. This must be in place and updated, especially if minors are involved. This should be in place for both parties in your divorce settlement if maintenance obligations need to be fulfilled.
These points should be reviewed on a regular basis to ensure that your current circumstances are taken into account.
Although it can feel overwhelming, being proactive in the drawing up of a well-considered financial plan and strategy will help you to move forward with confidence. Start with your budget, making sure you have factored in opportunities to save and grow your capital. Seek professional help and don’t be too hard on yourself – better times lie ahead.
If you need help with your future financial plan, get in touch with Adrian or Matt.