When you've recently separated or divorced, facing the task of managing your finances on your own can feel daunting. But now is the time to take control.
Financial independence is a goal to put at the top of your new priority list. Here are steps you can take to get there.
1. Start now.
The first step can be the hardest. it means making a personal commitment to take action, but once it's done the rest can come together more easily. Now is the time to sit down and make your plan.
2. List your goals.
What are your top priorities? Work out your obligations. Arranging the mortgage? Creating an emergency fund? Kids' education? Setting out your goals will help you work out what you need to do to achieve them.
3. Set your new budget.
Sticking to a carefully planned budget is good practice in any context. To work out where your money is going and how to manage it, follow these handy 5 budget planning tips.
4. Do the paperwork.
Given divorce, all your paperwork will need to be updated. Some to consider include;
Bank accounts, savings and transaction account statements. Close any and all joint bank accounts: this may seem obvious but it often gets overlooked in the upheavel and stress of the divorce process. Make sure your salary is going to the right account and that the other joint account holder has no access to it. You should also address details of any investments and superannuation funds, tax records and business documents if you had a business with your ex-partner.
Power and phone bills
Check that bills you need covered are still set up to be paid and that any automatic payments and debt repayments are made: Bad debts that are in joint names can still affect your credit reports.
Insurance, income protection, life, health, home and contents and car insurance. Review and revise any insurance policies that were applicable to your married status: Shopping around for competitive rates appropriate to your new situation may save you money, although it's important to remain covered.
Credit and store card bills
Freeze or close joint credit cards or store cards, until they are transferred to one name.
Property deeds or Rental agreements
Property deeds, mortgage papers or home loan details will need to be addressed. If you need to refinance you should get a financial advice. Update any rental agreement: If you were renting together and your name is on the lease, even if you have moved out, you could be liable for unpaid rent or property damage.
Wills and estate plans
After a relationship break-up you may need to update your will - particularly if you want to change any references to your ex-partner.
Make a list and work your way through it, ticking each off as you go.
5. Live within your new means
Your living situation, routines and expenses will be new. When you set your new budget, make sure your monthly expenses stay below your monthly income. Divorce can bring pretty major lifestyle shocks, but taking ownership of this new situation and creating good new spending habits to cope will help keep you on track.
Downsizing expenses may mean needing to think about moving to reduce your rental costs.
6. Plan for emergencies
An emergency fund that offers easily accessible cash along with having key insurance coverage can protect you and your loved ones against any unexpected events ahead. Ideally, you want funds set aside to cover basic expenses like rent, utilities, food and transport.
Everyone will have a different need so the amount you need to put aside will vary. As a general rule, aim to set aside enough funds to cover 2 to 3 months of living expenses and remember to include any loan repayments you may have.
7. Get good advice
When sizing up your finances following a divorce, get expert professional advice on all the points covered here, particularly around any investments or property.
Coming out of divorce in a healthy financial state is dependent on making sensible money decisions and remaining calm, realistic and proactive as you adjust to your new life.
If you’re having trouble coping with finances post-divorce, there are other avenues to get you back on solid financial footing, such as assistance from a personal loan for debt consolidation or home refinancing.
You can get free legal advice from community legal centres, located across Australia.
If you would like information on how Pepper Money can help you evaluate your home loan options after a financial setback like separation or divorce, contact one of our Lending Specialists on 13 73 77 – we’re here to help.