When it comes to the financial fallout from divorce, it seems that splitting up and dividing assets go hand in hand. But having the right financial plan can help steer women through the financial strain that often comes about after a divorce.
Research from the Australian Institute of Family Studies (AIFS) shows that divorce can often have a negative impact on the personal finances of both men and women.
AIFS director professor Alan Hayes said that divorce can be particularly challenging for mums who take on child-minding responsibilities.
“We know from other research that sole mothers with dependent children experienced difficulties combining paid work and family responsibilities with less support,” Professor Hayes explained.
According to the AIFS, the monetary gap between divorced men and women and married couples tends to widen with time – a worrying trend for those who are trying to save for retirement at the same time as they support a growing family.
“There is some evidence that the effect of divorce on assets lasts into older age and this negatively impacts on income in later life. But the long-term effects of divorce are largely offset by re-partnering,” said professor Hayes.
So what can individuals who are contemplating a divorce do to ensure that they aren’t left on the back foot?
Women were reported to suffer the most financially after a divorce – in most cases taking at least six years to recover from the initial split.
With this in mind, it is best to think carefully about the long term repercussions of a divorce for all of the affected parties.
This does not mean you are expected to stay in a relationship that has gone past its used by date – which could do more harm than good.
But simply that there are benefits that come with taking stock of the whole situation before making what might end up being a hasty decision.
Speaking to a financial advisor along with other experts, including solicitors and marriage counsellors, is an important first step when it comes to making a major life decision.
Along with offering expert knowledge and advice, you will also benefit from hearing a slight more objective viewpoint in what can be an emotionally taxing time.
Taking active steps to minimise the negative fallout from divorce and solidify your assets will also help you steer clear of problems during this time.
If you have a joint bank account, you will need to take active steps to pay off any debt or split equitably so that one person isn’t left footing the bill. It is also a good idea to close these accounts and open one in your own name as a way of establishing a good credit history.
Opening a savings or check account in your own name will help you start separating finances; it is also good practice at managing your own funds if you have not been responsible for household budgets in the past.
Tidying up mortgages is another major issue and for those who have a lot of equity in their home, it might be a good idea to start thinking about selling.
In cases where one partner may need to stay living in this home, it could be a good idea to have the loan refinanced in their name. This could avoid problems arising from unpaid mortgage repayments or difficulties concerning split bills.
Updating paperwork and listing assets is another hot tip, you may want to change the beneficiaries on your super or gain a greater insight into the exact sums that are being question during the divorce.
While there is no such thing as a fool-proof divorce, getting on top of your finances will make it easier to establish your new life.
ipac is one of Australia’s largest financial advisory firms and has offices based across the country. A wholly-owned subsidiary of the AMP Group, ipac specialises in research and financial advice that helps clients lead happier, more fulfilling lives.