The key to managing finances after a divorce is to get organised early. Grab a cuppa and have a read through this short guide for six tips on taking control.
Divorce can be one of the most financially and emotionally stressful experiences of a person’s life. The key to taking control is to get organised early. Acting quickly to organise accounts, update details and make financial plans may help start the next phase of life with more peace of mind.
The following steps are a great place to start.
1. Get organised
It’s important to keep track of key dates, such as when the separation occurred. It’s also a good idea to arrange a redirection of mail for the party moving out, so you continue to receive mail at the new address.
Both parties should gather all financial information, making sure there are copies of
all documents. Also write a list of all financial and property assets, liabilities and policies, making a note of whose name each document is registered under. This may include:
- bank, brokerage or investment accounts
- credit cards
- vehicle registration
- life, health, home, car, health and other insurance policies
- utility bills for electricity, gas, internet and phone
- property documents such as deeds, mortgage papers and home loan details
- recent tax returns and tax file numbers
- superannuation account details
- will and estate plans
- rental agreements or leases.
2. Close any joint accounts
It is important to close accounts or credit cards that are in both names and cancel any redraw facilities. This will protect the finances of each individual and ensure no more debt accumulates. Each should then open an account in their own name, which only they can access. They will also need to redirect any income that previously entered a shared account into the new account. Also check any shared social media or other accounts such as eBay – change of passwords may also be required.
3. Review your finances
Update any remaining accounts, loans or policies so they are registered in just one name. This can be time consuming, so make a list and tick them off as they’re completed.
It’s crucial to update insurance policies as any individual not named will not be covered. This individual will need to make sure that they have other cover in place that is adequate and affordable for their needs. Also, remember to update any nominated beneficiaries on new or existing policies.
The person whose name is on a loan agreement is responsible for any debt, regardless of changed personal circumstances. It’s vital for the necessary party to remove their name or for both individuals to pay off the loan. Sometimes agreements need to be reached prior to the changes being allowed.
Superannuation is usually a significant financial asset. Any nominated beneficiaries of the parties’ retirement nest eggs will need to be updated.
Rent and Utilities
Updating rental agreements and utilities will be crucial, as the listed person may be left with damage or unpaid bills to cover.
4. Change Wills, Powers of Attorney and Beneficiaries
Many Australians don’t realise that divorce can affect their will. Different states have different laws.
In Western Australia, for example, divorce automatically revokes a current will. It is vital to update wills to reflect new circumstances as soon as possible.
To be valid, a will needs to be signed by two witnesses. Drawing up a will can be complex so it is often best to consult a solicitor. Ask also about reviewing or starting Powers of Attorney.
5. Create a new budget
It can take time to adjust to relying on one income. Creating a budget and financial plan early on can make it easier to track expenses and feel confident that bills and payments will be covered.
6. Reach out
Most of us know someone who’s been there, and that divorce can be a very difficult time. There are many online government resources, as well as legal aid services, counsellors and financial advisers that can provide helpful advice on how to make the process as painless as possible.
Getting in touch with nearby support services or creating a supportive group of friends is the best way to get a helping hand.