With financial pressures mounting in every area of life during Coronavirus pandemic it is likely this could be causing a strain on your relationship too. If you do find your relationship has hit the end of the road it opens the complicated task of separating your finances from one another. Although you might start out negotiations with the best intentions it’s easy for the conversation to get heated and for emotions to take over, especially given the current market environment and fear of the unknown.
In this article we cover:
- Financial stress & separation
- Preparing your finances for separation
- Separating during a pandemic and current market
- How an adviser can help
Financial stress & separation
Stress is a completely normal part of separation and will be experienced differently for each person involved. Stemming from fear of the unknown, anxiety about your future, potential surprise or shock surrounding the separation; the emotions that come with separation are also intertwined with finances. Understanding your particular sources of financial stress can help you navigate your way through the separation journey.
Things to consider include:
- Financial literacy: if one partner has managed all the finances, the other may feel incapable of picking that up for themselves. They may doubt the honesty of their partner in explaining how things are. If you are lacking confidence in managing money, reach out for help.
- Adjusting your lifestyle: Separation will likely mean an increase in living costs for the family unit overall. Both parties will likely have to adjust the lifestyle they had been accustomed to. Prioritising which elements of your lifestyle are most important to you and your family can help reduce the pressure of trying to do too much.
- Timeframes: In many situations, there will need to be a sale of assets so that the proceeds can be shared. This will take time. By mapping out the timeframes and what the likely outcomes will be you can get some clarity and confidence while you wait things out.
- Creating your new roadmap: one of the greatest causes of stress is fear of the unknown, by mapping out your financial future clearly with an objective professional you dial down the potential negative power money fears can have.
- Opening up about money: it is a subject that is often not discussed but by speaking about things often as you move through the separation you will educate yourself, share your views and fears and create opportunities for compromise or progress. When you keep a lid on your money fears or doubts, you anchor yourself to your current situation. Find the right person to have informed money conversations with.
Money is a top cause of stress, and long term stress has incredibly negative impacts on your mental and physical health. The sooner you can get your financial situations out on the table and professional support to navigate the options, the better off you will be.
We are proudly partnered with The Separation Guide who can help guide you through the complete separation process, they also advocate for couples to find a way through separation without forcing each other into the courts, potentially saving them both from additional scrutiny and cost.
Understand how a financial adviser can support you with your need for financial security. Get in touch.
Preparing finances for separation
Start an open conversation:
Money is one of those taboo subjects that can be hard to discuss openly. Every relationship manages their finances differently, and it is common for there to be financial blind spots between partners. By outlining what each of you would like to achieve from your money conversation you can set yourselves up well for a full and frank discussion. It may also help to set an agenda following the outlined headings below (your goals, understand your financial picture, what to do with assets).
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Understand your own new goals and your partner’s new goals:
It may seem simple but taking the time to properly understand your new goals and your former partner’s new goal are, you can begin to understand what is going to be most important to each other. This is particularly important when separating as it may the first time in years or even decades that you’ve had to think about your own goals and not your goals as a couple. Each of you should consider your own goals and then use it as a discussion point moving forward. This may help you identify your potential living expenses, areas to compromise and so on.
You can use our goals worksheet here.
Get a clear picture of your finances:
By deep-diving into your finances, you will be able to gain a clear picture of what your current financial position is. The best way to start this is by creating a budget, this will help identify income streams, expenses and liabilities and it may also highlight some joint fees and services you no longer need now that you are separating. Creating a budget is also a necessary tool for splitting finances and this document will often be required when seeking advice or legal proceedings.
You can use our free budget planner here.
You may also find our simple guide to budgeting useful.
Decide what to do with assets:
Now you have a better understanding of your goals and financial position the decision around what to do with your assets may be a little clearer. This is often where we see conversations start to get most heated. You may start to bargain with one another, and tension can begin to rise. We recommend seeking the advice of various professionals or using a mediator to manage the conversation if you can’t reach an amicable agreement.
Assets that can be divided include:
- bank accounts
- stocks or shares
- items such as furniture or artwork
- any other assets
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Separating during the pandemic and current market
Separating from a partner can be an emotionally draining and stressful time at the best of times, but the current pandemic only compounds those issues. Many Australians are finding themselves out of work for the first time. Others are fearful of what may come.
If you do find yourself facing financial hardship during this time it’s important to understand what benefits are currently available to you as a couple and or individual. This will give you an action plan and some clarity around your position and what you should do next.
You can download our financial hardship action plan here.
Depending on the stage of your separation you may need to apply as a couple or individual.
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Given the current market, you may have new concerns about whether now is a good time to pull out of an investment. Whether you are invested in shares, property or superannuation, the current market may have seen the reported value of your investment temporarily dip and as a result have you considering if you should delay sales and finalising separation until things recover. Depending on how amicable the separation is this may or may not be an option, especially if doing so could be further harming your emotional and mental health. We can also never time the market which means you do not know exactly how long you will be waiting for. There is also no guarantee the market won’t drop further. Although we would all like to perfectly time the market there is never really a perfect time to pull out, you need to consider your personal needs and take your circumstances into account. If you are exiting investment and then reinvesting at the same time, the market position becomes less important as you are selling and buying at similar rates.
The other main asset for most couples is their home. Property prices are predicted to decrease, and again, if you are selling and buying in the same market it is less of an issue. This will become more problematic if you are selling now and then need a long period of time to buy back in. It is worth discussing your options with an adviser to understand how to make the best choice for you.
If this is something you are considering we highly recommend seeking the advice of a professional such as Financial Adviser who will help you make informed decisions based on your own circumstances and needs.
You can read more on this topic below:
How an adviser can help
You may already have an adviser or are considering seeing a financial adviser for the first time. An adviser will be able to see your entire financial picture, get to understand you, help you clarify and prioritise your goals and provide you with a structured plan on how to manage your finances moving forward. Once you are separated, they can also help on your journey towards reaching your new goals and dreams.
Divorce is an emotionally draining experience and it is extremely important that people are seeking the right assistance from a number of different professionals. Financial Advice, Legal Advice, Accounting Advice & even Psychological Counselling are important steps to ensuring that divorcees navigate appropriately through a plethora of issues and bring some sort of normality and clarity to their new life.
In recent experience with clients who are filing for divorce we have been able to separate their accounts and introduce another Invest Blue Adviser to take on the spouse file. This avoids any conflict and brings impartiality to the scenario. – Ben Warren
An adviser can also:
- Ensure beneficiaries are realigned after divorce.
- Help with superannuation transfers from court orders and invested correctly.
- Establish your own new budget and ensure you’re comfortable with your finances and understand and look after your own finances.
- Review your wealth protection to understand what is now required.
- Assist with claiming Centrelink, single-parent income and any additional benefits you may be entitled to.
- Review all debt levels if any and can assist to restructure if necessary or advantageous now single. They will also help you to understand the loan requirements.
You may be interested in our article: face to face with financial advice – the first meeting
Separating isn’t easy in the best of times, let alone amidst the uncertainty of a pandemic.
By simply starting with a conversation, exploring your goals and dreams, creating a budget and understand your joint finances you will be able to better prepare your finances for separation. Seeking the advice of a professional to guide you through this process can help minimise the stress and give you a holistic overview of your exact financial position and may help you move through this journey with more ease and peace of mind and ensure any financial decisions are in your best interest and align with your goals and dreams.
If you would like to discuss your options with one of our advisers, you can book a complimentary initial consultation here.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.