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Financial shakeups; How to manage breakup and divorce finances

How to manage breakup and divorce finances

Life often throws unexpected and unwanted challenges; if you’ve built a nest egg as a couple then breakup it can feel like starting all over again. However, with some attention to your savings accounts, financial plans, super and more, ‘natural disasters’ such as divorce can leave you feeling cleaned up and repaired, rather than just cleaned out. Guest writer Peter Wood explains how to get things back on track.

Consider Kim Kardashian’s divorce trial, set to begin in May. The court is expected to hear claims that the marriage should be annulled because it was fraudulent. And this has been going on for more than a year.

But whichever way Kim divides the $18 million it is rumoured she scored for the media rights to her wedding, the court will still be splitting $250,000 for every day she was married. Not a bad windfall.

However, the rest of us may take comfort in knowing that the larger the pool, the more complex the investments, and therefore the separation legalities will be more expensive. Sorting out divorce or breakup finances can be as methodical as it was when you first set up any joint home loans or other investments.

Joint super

For all the complicated laws surrounding Australia’s superannuation policies, breaking up isn’t that hard to do when it comes to joint super. Once you separate or divorce, super can be seen as a type of ‘property’ and can be divided between a couple by agreement or court order.

When joint superannuation interest becomes payable for a member spouse, some moneys may also be paid to a non-member spouse. The non-member may also receive benefits from another fund through interest splitting entitlements, completely independent of the member spouse.

Know your worth

List any assets you may have alongside any debts or joint debts in your name. If you are continuing in the workforce and have superannuation assets of more than $200,000 and have a divorce looming, then it could be time to consider a self-managed super fund and learn about the benefits of approved SMSF high interest accounts.

Saving for a house again

You will be adjusting to a change in income and you will need to review your cash flow comings and goings. This can be an opportunity to become aware of budgeting techniques and tools such as calculators that can take into account your new household costs, bills, investments and more. Managing this cash flow is the first step to managing a new mortgage.

Use a mortgage calculator to figure out the repayments required on your dream home. Then, set up an online high interest savings account and automate the contributions your loan would require. You’ll develop good habits and earn interest in the process.

More organised now means less repair later

Getting organised with your post-separation finances will mean you can get ahead again more quickly. You should have recorded the dates of your separation (even just for divorce proceedings) and closed joint accounts accordingly.

Get your own savings back on track

Re-establishing your own pool of money with a new bank can mean your ex-partner cannot access funds, and your credit history is more likely to stay intact. Make sure your pay starts to go into your new account and do a financial stocktake of your current situation.

Your financial repair after a breakup or divorce is one thing that doesn’t need to take a huge toll on your emotions. Try not to allow yourself to get bogged down under the apparent logistics of separation and divorce finances. If you approach major life events with a willingness to learn new and clever ways of money management, you may even find yourself in a better position than you were previously.