How to build your wealth after separation

Researchers have found that divorce is one of the most stressful and painful life events anyone can go through, only second to the death of a spouse or a child. And the amount of pain isn’t just emotional. There are ongoing financial consequences following a divorce, and some people can find their finances in tatters at the end of the process.

Rebuilding your wealth after a divorce doesn’t have to be a pipe dream. It might take some time, and a lot of hard work, but there are steps that you can take and trusted professionals you can turn to in order to rebuild your finances and secure your financial future.

Where to start?

Make sure you have the basics covered off before you move on to the next steps:

1. Protect your privacy

   Change passwords on bank accounts, phone and internet banking, emails, phones and computers and other devices.

   Whether you have been involved in managing the finances in the past or not, you need to get up to speed on the state of your finances. In particular take immediate steps to request dual signatures on any joint mortgage redraws. Understand what is in any joint accounts, what your joint liabilities are and immediately ask for a proof of balance and also ask for the past seven years of statements. You should open a bank account in your name only if you don’t already have one, and credit cards should be in your name only.

2. Access financial entitlements

   You may be entitled to Centrelink payments so you should also update your situation with them to determine if you qualify for government assistance such as Family Tax Benefits. If there are children involved you may also need to contact the Child Support Agency to discuss your circumstances and any payments you may need to make or receive from the other parent.

3. Financial abuse and support

   It’s worth noting that analysis of data from the Australian Institute of Family Studies shows that while women are more likely than men to initiate divorce, they’re also far more likely to suffer as a result of it.

   If there has been financial abuse in your relationship – where the other partner has controlled the finances and prevented you from accessing money or knowing the full picture about the financial situation -  it might be daunting to have to tackle all of this, but it’s important to seek support and increase your financial literacy to take control of your own financial future.

   There are a number of resources available to help should you or someone you know be experiencing financial abuse.

4. Having a financial wellness strategy

   Building your financial capability for the future relies on you having a financial wellness strategy to get through the short, medium and long term.

Short term goals

Daily money management is the most immediate priority in the aftermath of separation. Running your household on a new, and potentially shifting, budget will require you to have systems and processes in place to create a budget and plan for expenses.

Helpful budgeting resources include:

• Budget planner spreadsheet download
• Keep on top of your spending habits with Track My Spend app 

Get your house in order

Your budget helps to manage the daily ingoings and outgoings and you should aim to spend 50% on essentials, 30% on choices and 20% for the future. The purpose of this strategy is to pay down debts, build an emergency fund and achieve long-term savings goals.

This is a good time to do a health check of your superannuation accounts – consolidate if you have multiple accounts and check to see if your fund is performing well. Update any superannuation beneficiaries. Generally, your superannuation will go to a nominated beneficiary unless you have nominated it to go to your estate… and if you haven’t nominated a beneficiary, the trustee of the fund can determine where it goes if you die.

You should also update your will, and check any life insurance policies along the same lines. Look at all your insurance and make sure you have the right amount of coverage for your new situation and you’re getting the best deal. This includes home and contents, health insurance, car insurance, income protection and any other policies you hold, or should hold.

Looking forward to mid and long term financial wellness goals

It’s important to build a team of trusted professionals around you to navigate the separation process and get back on your feet. Their expertise and experience shouldn’t be underestimated. Your team may include a lender, property advisor, legal professional, accountant, financial planner and counsellor.

If you stopped working today, how long would you be able to survive financially on the money you have while maintaining your current lifestyle? How much will you need?

This might be sobering in the immediate months and years following separation, but to increase your net wealth you need to know your starting position and have a strategy in place to grow it.

For example, if your total annual expenses were $50,000 and your investment income is greater or equal to that amount after tax you would be financially free.

Once you have our daily money management under control, you are not going into debt, you can begin to save for mid-term goals like a family holiday. But to be ensure a comfortable lifestyle when you stop work you will need to do more than just ‘accumulation based savings’. Instead you’ll need to think long term about investments, such as super, managed funds and property to fund your lifestyle once you stop working.

More help is available:

1. Attend an education event with DPN.
2. More information and resources
3. Speak to DPN on 1300 723 318