Episode Details

Financial Autonomy is about managing and planning for major transitions in life. A transition that many of us face unfortunately is divorce. I understand researchers have found that going through a divorce can be one of the most stressful things you can experience in life. As a financial planner, I often work with clients who have been through or are going through a divorce, and assist them in the planning necessary to get them back on their feet financially. In this post I've broken down the things you need to be thinking about into 4 key strategy elements. If you can work through these, you'll be in a position to get your financial life back on track, and with this stress removed, hopefully your life back on track too. Divorce is certainly no fun. But it does offer the opportunity to hit the reset button in your life. With some good financial planning, this next chapter in your life can be the best yet. Fortunately the days of couples sticking together in relationships that no longer work are behind us. Divorce provides the opportunity for a fresh start. But of course beyond the very significant emotional pain of getting through a divorce, the financial consequences are also very significant. There may be many reasons for getting divorced, but improving your financial position is rarely one of them. Whereas you and your partner once shared a roof over your head, there is now a need for separate housing. Often children are involved, so considerations of being local and having enough room for the kids can be a big challenge. It's not an option to move half an hour or more away to find more affordable housing when you don't want to turn the kids' lives upside down. You typically also go from two incomes and sharing expenses as a couple, down to one income with little change in expenses, so budgeting becomes a real challenge. Often one of you will keep the family home so as to minimise disruption for the kids, but this may mean borrowing a significant amount so that your partner is able to move on with their life and get a new house of their own. How will you service this new debt? You may be required to pay child support, which, on top of new housing costs can be a real strain. And thinking longer term, retirement plans are often significantly disrupted. Often one member of the couple took time out of the paid workforce to help raise the children. This means their superannuation balance is typically considerably less than their former spouse who worked through. This difference is allowed for in your financial settlement, but the result is that you are both now facing a less generous retirement outlook than was once the case. So divorce has big financial impacts. But as I mentioned at the start, divorce also provides an opportunity for a fresh start. It provides you with an opportunity to steer your life in the direction that you want to head, possibly without the compromises that you needed to make when you were in your former relationship. You can set goals and work hard towards them without the potential for your former partner to decide they need a new car, or some other distraction. Financial Autonomy is about giving you choices, and managing key transitions in your life. Divorce is quite clearly a significant transition, and also an opportunity to gain choice. So let's look at a few strategies that might help you get back on your feet. 1. Budgeting The starting point must be gaining clarity around how much you have coming in and how much you have going out. Following the divorce your household arrangements have changed, and possibly there is child support obligations and spousal maintenance to meet. Or perhaps in reverse, you have these support payments coming in and need to ensure they are used wisely and appropriately. You can create your budget in a spreadsheet. We also have a sample budget template in the toolkit for this post. There are also bu