Getting divorced later in life can often mean your savings take a big hit. Dipping into your retirement savings is not uncommon in grey divorces and setting up a new home is always a costly exercise. Ian Shann, from Move On Mediation in Perth, has put together some helpful tips on how to rebuild your savings after divorce.
Having an emergency fund in place provides peace of mind, knowing that you’ll be able to deal with any of life’s little surprises during the difficult period after your divorce. Building an emergency fund can take time depending on what your goal amount is, so the sooner you can start one the better.
Many savers aim to have three to six months of basic living expenses in reserve. A good way of building an emergency fund is to put aside a set amount at the beginning of each month and not wait to see if anything is left at the end of the month.
Rebuilding your assets after divorce usually starts well before your divorce is legally finalised. By obtaining professional advice early on you’ll know your rights and obligations to enable you to ensure your assets are divided fairly and according to the law.
This will also give you a fair idea of what assets you’ll have and financial support you may be entitled to receive from your ex after the divorce.
Once you have evaluated your financial situation and have a good idea of what your income after divorce may be, you’ll need to create a realistic budget to match your income.
In most cases there are bound to be some lifestyle changes and it’s vital to prioritise essential needs over your non-essential wants. Keeping tabs on your daily expenses will enable you to identify ways of cutting down unnecessary expenses and live within your means, at least until you’re back on your feet.
Rebuilding and protecting one’s finances after a divorce can be extremely complicated and difficult. It can leave many people, who may already be emotionally drained, perplexed and overwhelmed.
Consulting a trusted financial adviser may take the weight off, making it easier for you to decide on issues like where to invest, where to cut down and how to reorganise your savings, income, bills, debts, and taxes.
Superannuation is often overlooked when it comes to divorce. Investigate whether your super fund is performing the way you expect it to, relevant to whether you still have several years to contribute to it or whether you will be drawing a pension from it in the short term. Professional financial advice is essential.
It is also important that you review your named beneficiaries for your superannuation and insurances to ensure that funds go to the people you choose to nominate.
There are many steps you can take to save money and rebuild your finances after your divorce and one major step is to downsize.
Consider living in a smaller home to suit your new situation. Even if it’s for a short period, it will help you save money and rebuild your reserves until you’re back on track with your finances.
Investing wisely becomes even more important after a divorce. Solid advice from a trusted financial adviser is highly recommended when making any investment decisions.
How you invest will very much depend on your financial situation and short-, medium- and long-term financial goals.
Explore all opportunities to increase your income if you are able to work in any capacity. Depending on your personal skills, you could look into finding an extra part-time work, starting a side-business, ask your boss for a salary increase or take on extra hours.
It’s worth investigating your entitlement to any tax benefits or government support after your divorce. You may also be entitled to receive different subsidies from Centrelink as a single person.
Note: This blog is not intended as financial or legal advice. Consult a registered financial advisor before making any financial decisions.