A bump in the road, then a new start
Taking stock of how your life’s travelling at the start of a new year is a great idea but you might feel more urgency if you’ve recently come to the end of a serious, long term relationship or gone through a divorce.
What’s next, you want to know. How do you rebuild your life, is your financial outlook positive, what happens if you find a new partner? The questions, and often anxieties, have a tendency to pile up.
While the key things in life are good health, personal happiness and loving relationships, financial security is very important too. And from a financial point of view, there are definitely steps you can take to get your life back on a more stable and desirable foundation, so you are free to focus on rebuilding your happiness.
In his new book – Money, Marriage & Divorce – Paul Clitheroe AM tackles the financial side of relationship breakdown, helping you find a new financial start, whether it’s staying in a relationship and working through, or going your separate ways.
For many recently-divorced or separated, you may find yourself with a significant lump sum, being your share of the financial settlement. Paul suggests that it’s probably best not to do anything too major with that money, such as going out and buying a home, too soon after you get it. Take a breather, wait a while until the emotional dust has settled and you’re thinking more clearly about what to do next. Whatever you do, don’t go on a spending spree – this money is likely to be critical to your future financial security.
Here are some tips to think about if you do go your separate ways:
1. Goal setting
When the dust settles identifying some short, medium and long term goals and creating a financial plan is a sound step. With a plan you’re likely to feel more in control and less anxious about what’s ahead – a plan helps you shape your own future, rather than being shaped by it. It’s at this stage that a good financial adviser can help you formulate goals and provide a pathway, and strategies – in areas including investment, super, tax, insurance and estate planning, to help you reach them.
2. Work out how much you can spend and save
One thing you should definitely do as you make a new start in life, is make a budget – reflecting your life ahead, not your former lifestyle. A realistic budget means taking control of your money, helps you keep spending in check, and shows you where savings can be made – a key building block for your new future.
Until you’re accustomed to your new circumstances, try to avoid taking on any new debt, and aim to pay off any existing debts, starting with the highest interest ones first. If you’ve taken over the (pre-separation) family home and there’s a mortgage over it, or you end up buying a new home somewhere down the track, aim to pay the home loan off and become mortgage-free as soon as possible.
3. Make it a Super-future
The amount of superannuation you have following a separation or divorce may be less than you had before it. Because super is so tax effective, it can really make sense for you to try hard building it up for your future, and salary sacrificing can really help. Again, talk to your financial adviser about this, it can be a complex area and you’re very likely to benefit from professional help.
4. Learn from the past, prepare for the future
If you choose to re-partner, consider a prenuptial agreement, more accurately termed a ‘binding financial agreement’, drawn up by, and signed in the presence of, your lawyer. It’s designed to help protect your assets in the event of a split up and helps remove the anxiety about sharing your future with someone new.
Don’t forget your estate planning. A post-divorce life, with or without a new partner, calls for new arrangements.
While separation and divorce is likely to put you through an emotional wringer, things are likely to improve. You wouldn’t have gone through the distress of a break up if you didn’t think a happier life lay beyond!
With new challenges come new opportunities for personal happiness and growth so when you’re able to clear the fog, grasp your new opportunity with both hands!
– by Paul Clitheroe AM
Paul Clitheroe AM, co-founder and Executive Director of ipac securities limited, Chairman of the Australian Government Financial Literacy Board and Chief Commentator for Money magazine.