Help is at hand to regain your financial stability
If you are going through a divorce, chances are you are not alone. The latest figures from the Australian Bureau of Statistics indicate there were 48,517 divorces granted in Australia in 2015.1
Ending a marriage is never easy, with those going through it experiencing both emotional and financial upheaval. However, engaging a financial adviser early on may help to ease the burden of preparing for the property settlement process, and help you regain your financial stability.
Even if your split is amicable, it’s important to seek your own legal advice. Once you engage a family lawyer, they can help you to move forward with the legal process for the asset split. However, legal advice does not necessarily mean you’ll avoid the long-term financial pitfalls that divorces can bring, which is why it’s worth considering engaging a financial adviser early on in the process too.
Things to consider immediately after you separate
There are a number of things to work through when it comes to your finances following a separation, and for many, this can feel overwhelming. There will be immediate tasks to take care of, such as determining new living arrangements, taking care of children, and managing a new cash flow. It’s likely you’ll need to create a new budget, open new bank accounts in your own name, and understand your liabilities. To make it easier, ASIC has created a useful divorce and separation financial checklist of things to consider once you separate from your husband or wife. It includes tips about what to do you with your bank accounts, credit cards and mortgages.
An adviser would also look at your superannuation and personal insurances to ensure you have a holistic plan in place.
The property settlement process
Your family lawyer will help determine the best strategy for your case, and he or she will ask for a number of materials revolving around the assets that you and your ex-partner own, explains investment adviser for Macquarie Wealth Management, Boyd Carter.
These may include superannuation documents and trust deeds, family trust deeds, past tax returns, mortgage deeds, and information about any other financial assets.
Carter says a financial adviser can help with the property settlement process in two key ways:
- Fact-finding important law information
The first is by assisting with the gathering of these materials on behalf of the client, in conjunction with what their family lawyer needs.
“With the client’s permission, an adviser can do the running around for them. They can speak to their accountant, to any other lawyers their client may have documents with and gather the information for them,” says Carter.
“You would imagine that people going through the divorce process are not in the state of mind to want to do that. Divorces can be traumatic experiences and using the services of an adviser can mean there is less to worry about.”
- Assessing the cost of a sustainable lifestyle
The second way an adviser can help is to put together a personal budget for their client, so they actually know what their ongoing expenses are. They can then help to work out how much is needed to sustain their lifestyle, and calculate how much income a particular lump sum could generate each year going forward.
“We don’t think about asset values as a lump sum, we think about them as a future cash flows,” says Carter.
“After creating the budget, we might determine that you need a certain amount of money a year to maintain your current lifestyle. Then the solicitor might ask us, ‘what is the lump sum required to generate that income?’” says Carter.
“An adviser can help determine what the client is going to need to cover their cost of living in the future.”
How to get back on track for a bright financial future
To successfully rebuild your financial life after a divorce, you'll need a comprehensive financial plan in place, and a realistic budget that you can stick to. Given the median age at divorce in 2014 was 45.2 years of age for men and 42.5 years of age for women2, it's important to focus on the long term.
Once your property settlement has been determined, you’ll have a clear picture of what assets and income you have on hand moving forward. This will help you and your adviser to work out a long-term plan to secure your financial future.
Following your property settlement, your adviser will work with you to establish your financial goals and investment risk appetite.
“It’s essential to ensure that any settlement proceeds are invested in a way that’s going to supply the client with the income they expect and need throughout their lifetime,” says Carter.
It’s crucial to decide what the best mix of assets is to secure your future. It’s just as crucial the client is aware as soon as possible if their lifestyle expectations cannot be met, notes Carter.
At this stage an adviser would also look at your superannuation and personal insurances to ensure you have a holistic plan in place.
They will also monitor your circumstances to ensure that their ongoing financial advice takes into consideration any changes to your goals, objectives, or investment risk appetite, and also any changes to superannuation or taxation legislation which may affect you.