Getting divorced later in life can often mean your savings take a big hit. Dipping into your retirement savings is not uncommon in grey divorces. Setting up a new home is always a costly exercise, whether you’re a parent or starting over single and solo.
Family mediator Ian Shann from Move On Mediation in Perth has put together some helpful tips on how to rebuild your savings after divorce. From having an emergency fund for life’s little surprises to investing and downsizing, there are several things you can start today to rebuild your savings after separation.
Start An Emergency Fund
Having an emergency fund in place provides peace of mind. Knowing that you’ll be able to deal with any surprises during the potentially tricky financial period after your divorce. Building an emergency fund can take time, depending on your goal amount, so the sooner you start one, the better.
Many savers aim to have three to six months of basic living expenses in reserve. A good way of building an emergency fund is to put aside a set amount at the beginning of each month and not wait to see if anything is left at the end of the month. Because you know there will always be something else you can spend it on. Saving before you spend it is the best way to build your emergency fund from day 1.
Ensure Your Assets Are Divided Fairly
Rebuilding your assets after divorce usually starts well before your divorce is legally finalised. Property settlements can happen well in advance of your divorce being legally finalised.
By obtaining professional advice from family lawyers early on in the separation process, you’ll know your rights and obligations. This will enable you to ensure your assets are divided fairly and according to the law.
It will also give you a fair idea of what assets you’ll have and what financial support you may be entitled to receive from your ex and the government (if relevant to your circumstances) after the divorce.
Create A Realistic Budget
Once you have carefully evaluated your current financial situation, you should have a good idea of your income and expenses after divorce.
Now, it’s time to sit down and create a realistic budget to match your income.
In most cases of a relationship breakdown, there are bound to be lifestyle changes for everyone involved. It’s, therefore, vital to prioritise your family’s essential needs over the non-essential wants.
Keeping tabs on your daily expenses will enable you to identify ways of cutting down unnecessary expenses and live within your means as a newly single parent until you’re back on your feet.
It might mean dropping some luxuries in your grocery shop, changing utility providers, or reducing your kid’s paid activities. Remember, it can be temporary if you stick to your budgeting, planning and saving!
Consult A Trusted Financial Adviser
Rebuilding and protecting one’s finances after a divorce can be extremely complicated and challenging. It can leave many people who may already be emotionally drained, perplexed and overwhelmed.
Consulting a trusted financial adviser may take the weight off, making it easier for you to decide on issues like where to invest, where to cut down and how to reorganise your savings, income, bills, debts, and taxes.
Ask friends and family for recommendations on who to consult, and make sure you find out about their fee structure before you book that first meeting. There’s no point getting into debt if you aren’t sure who to trust regarding financial advice.
Review Your Superannuation & Insurance
Superannuation is often overlooked when it comes to divorce.
Investigate whether your super fund is performing the way you expect it to, relevant to whether you still have several years to contribute to it or whether you will be drawing a pension from it in the short term. Professional financial advice is essential.
You must also review your named beneficiaries for your superannuation and insurance to ensure that funds go to those you nominate.
Insurance is another area many couples forget to check and update after separating. Most couples have family cover for health insurance, and contents, home and car insurance are often in one person’s name despite covering joint assets. Make sure you review who pays for what insurance, and what cover you have in place. Undoubtedly, all your insurance policies will need to be reviewed and changed to cover the separation of these assets.
Consider Downsizing
There are many steps you can take to save money and rebuild your finances after your divorce, and one major step is to downsize.
Consider living in a smaller home to suit your new situation. Even if it’s for a short period, it will help you save money and rebuild your reserves until you’re back on track with your finances. And just think, the smaller the house, the less time you’ll spend tidying up!
Invest Wisely
Investing wisely becomes even more important after a divorce.
Solid advice from a trusted financial adviser is highly recommended when making any investment decisions.
How you invest will depend greatly on your financial situation and short-, medium- and long-term financial goals.
Look Into Additional Income Streams
Explore all opportunities to increase your income if you can work in any capacity.
Depending on your skills, you could look into finding extra part-time work, starting a side hustle, asking your boss for a salary increase or taking on extra hours.
Investigate Your Entitlement To Government Payments
It’s worth investigating your entitlement to any tax benefits or government support after your divorce.
You may also be entitled to receive different subsidies from Centrelink as a single person. A financial adviser may be able to help you with this, or you can enquire directly with Services Australia. They have a good collection of information and calculators on their website to get you started with what payments you may be entitled to claim as a newly divorced single mother.
Note: This blog is not intended as financial or legal advice. Consult a registered financial advisor before making any financial decisions.
