Whether they saw it coming or not, divorce usually ranks as one of the most devastating events in a person’s life. For women who are within 10 or 20 years of retirement, it can be an especially cruel blow.
When you’re dealing with the emotional fallout of saying goodbye to the person you once promised to spend your life with, having to also manage the finances can be overwhelming.
Just at the time when you most need to be using your head, your heart may step in and sway good judgement and decision making.
But removing emotion from the equation and focusing on being practical is much easier said than done, so we’ve put together some important steps to take along the way.
1. Arm yourself with information
When divorce knocks on the door – whether you chose it or not – the future can seem scary and it may be hard to think clearly. It usually pays to seek advice from professionals and to do it early.
A common reaction for many people is to want to “keep the solicitors out of it” and negotiate things themselves. But remember that self-preservation makes it likely that each person is out to protect themselves first and foremost.
Seeing a solicitor, even for an initial appointment, is extremely useful. They can explain the process and your options to you. They will be able to advise you on your realistic legal entitlements.
Once you have a good understanding of these things, consider seeing a financial adviser who has experience in family law. Good financial advice can help you to understand your finances and reduce your anxiety.
Property settlements may take a long time to resolve and during this time it’s helpful for people to understand their options within the parameters of the law.
Scenario planning with a financial adviser can be helpful as it can provide a visual snapshot of a range of outcomes, such as how much you would have to live on week to week.
2. Visualise the longer-term picture
Although it’s natural to be wrapped up with fear and worry about the immediate future, it’s important to focus on what you want longer-term. Think about where you want to be five years from now – a lot can be achieved in that time. Make a plan and consider what you need to do to get there. This might mean going back to study, starting a business, travel, applying for jobs or furthering your career.
3. Research income streams
There are generally three major sources of income: earnings from assets; earnings from a job; and Government benefits.
Income from assets. If you are likely to receive assets in the settlement, think about what sort of income you can get from them. Consider whether you ought to keep or change them. For example, should you sell an investment property or keep it? Can you commence an income stream with your superannuation? It pays to seek professional financial advice before you make what could be life-changing decisions.
Earnings from a job. The best thing you can emerge from a divorce with is an ability to earn an income. If you are not working, consider if you can get a job, what you can earn and/or what training you could do to re-enter the workforce earning more. Take action now to set yourself up for the future. Even if you are currently working, but are not on good money, look at what you could do to upskill and earn more.
Government benefits. As a newly single person, it’s worth investigating your Centrelink options and finding out your entitlements.
4. Consider superannuation
The Australian Bureau of Statistics says that over the past 20 years Australians are divorcing at an older age, so many more divorcees are closer to retirement age than in the past. This means that you may have less time to build up your own retirement funds.
One of the most important things to do when facing divorce is to review your superannuation. How much do you have? Is it enough? Is it in the right place? It may be that part of the property settlement includes a superannuation split whereby some of your super is allocated to your spouse or vice versa.
Also, don’t forget to also check who is the nominated beneficiary on your superannuation account – you may wish to make a change if your soon-to-be-ex-husband is listed.
5. Don’t rule out renting
One of the first considerations when a marriage is over is where you are going to live. Do you buy somewhere or rent? Should you keep the family home or sell it? These are important questions – and the answers largely will depend on what your settlement looks like.
Many women want to stay in the family home but a few years down the track they have to sell it because they can’t afford it. They become asset rich and cash poor.
While the notion of renting may be completely foreign for some, it may be worth considering. It’s not necessarily going to be forever – renting can be a good short-term solution while you get back on your financial feet, or for some it’s a longer-term fix and money can be invested in other ways.
6. Draw up a spending plan
A spending plan puts you in control, empowering you to make good decisions. It’s vital to know what you can – and cannot – afford to spend. The key to a workable plan is to know your expenses inside-out and be honest with yourself about where you might cut back.
7. Check insurances are in place and appropriate
Insurances are vitally important to protect you and any children you have. If something happens to you, you don’t want your children to be left in the lurch. Make sure you have the right insurance in place and the appropriate level of cover. The key insurances to consider are: life insurance; total and permanent disability (TPD) insurance; trauma insurance; and income protection insurance.
8. Update your estate plan
This is important. The rules regarding the impact of divorce on a will vary state to state, but generally speaking it’s safest to speak with an estate planning lawyer as soon as possible. It is a good idea to create a new will.