Women, Money & Divorce

By Jenny Brown, CEO and Senior Financial Adviser

Ladies, this one is for you.  We want to discuss the topic of divorce and how it impacts you financially.  This article is about empowering women to understand their financial position and ensure that they remain on track to reach their own financial goals regardless of what life throws at us.

Even if you were married to Tom Cruise, Tiger Woods, or Brad Pitt, when you divorce, it’s highly likely that your financial position will be negatively affected. Sure, their divorce settlements might have had a couple more zeros on the end of the figure, but assets still must be divided.

What does that mean for you if you’re going through a divorce?

Take time out and concentrate on organising your finances.  You should consider the following:

• Understand your financial position by visiting a trusted financial adviser.
• Reassess your financial goals as it’s all on you now.  What do YOU want to achieve?
• Get a Post Office Box for a single mail location regardless of your residential address.
• Revise your Will or your ex could be entitled to some money on your passing.
• Update your Superannuation Nominations as binding nominations remain valid even after a divorce.

Going through a divorce, separation and de facto relationship breakdown can be a very stressful time. There is a lot to consider including property settlements, splitting of assets (and debts for that matter), and the inevitable task of rebuilding your finances.

A study by the Australian Institute of Family Studies has painted a gloomy picture for women of divorce, especially mothers. It showed that it would take divorced mothers six years to rebound financially from divorce, with household income dropping significantly, particularly in the first year.

The study also showed that divorced people have fewer household assets than their married and never-married counterparts. It was reported that assets of those who divorce total around $185,000 less than non-divorced people. That gap doubles to over $360,000, six years after a divorce.

Due to time out of the workforce to raise children and lower-paying roles, women will earn less than men. They also have the further burden of trying to return to the workforce after time off when their skills and knowledge may not be as up to date. When they find work, many women have difficulty combining work and family responsibilities and find childcare either hard to find or expensive, making it almost worthless returning to work.

Further financial burden arises as many banks are reluctant to lend to women who have been out of the workforce and are seeking a loan later in life. Having a female in her 40 or 50s on a lower income with childcare costs ask for a 30-year loan might not make the banks jump at the opportunity.

The research didn’t paint a great picture for women of divorce. If it’s any consolation, the study also showed that women fare better emotionally than men after a divorce. It is reported that on average, more men feel isolated for up to six years after the breakdown of a relationship than us women.

Tips to your financial freedom after a divorce.

Understand your new financial position. If you’ve never been the financial controller of the family, this can be daunting. The best way to understand your own financial position is to see a professional so bundle up all the financial information and statements you have and see a financial planner.

A financial adviser can assist you to see where all your money is and with creating a budget, as well as consolidating existing debts so you are comfortable with your financial obligations. Remember that financial advisers are bound by confidentiality rules and therefore, we are unable to disclose any of your information to anyone without your consent.

Reassess your financial goals.

Now that things have changed, you’ll want to think carefully about what you want to achieve in your life. Do you still want to take that annual holiday that you were originally aiming for or is sending the kids to private school more of a priority now? Determining your financial goals may again require some assistance to help you map these out.

Get a post office box.

Re-direct your mail! You want to ensure that your mail is not accidentally going to your ex’s house or being confused with their mailing address. A post office box will ensure that you have a stable location to receive all correspondence regardless of your physical address.

Remember to revise your Will.

Separation from a partner does not revoke a Will and divorce only revokes some aspects of a Will. You may find that if you do not update your Will, some of the instructions may still be followed, allowing your ex to be eligible to receive some of your assets on your passing. When you separate or divorce, you should implement a new Will with a solicitor that will replace any old Wills.

Update your nominations on your superannuation.

While a Will may be revoked after a divorce, a binding nomination for your superannuation remains valid until a new binding nomination is made or it expires after 3 years of implementation. This could mean that if you do not change your nomination, your ex-partner may receive your superannuation balance should you pass away prematurely. Update your nomination as soon as possible by contacting your financial planner or the superannuation fund directly.

Update the beneficiaries on your insurance policies.

A separation or divorce has no bearing on the listed beneficiaries of your insurance policies. If you want a different person to receive the proceeds of any cover you hold, you need to change it.

Not getting divorced but want to take control of your money?

Relying on your partner may mean that your own goals are not achieved. By taking control of your finances, no matter what curve balls life throws at you, you will have a better understanding of where you are heading in the future.

Tips to take control of your finances:

• While you’re working, contribute extra funds to super to compensate for the time when contributions stop during the child-rearing years.
• If you’re taking time off to raise your children, keep your skills and education current so that getting back into the workforce later isn’t a challenge.
• Have some assets in your name solely. This always ensures access to funds.
• Ask about your financial position. You don’t have to take over the family finances but both parties to a relationship should at least understand what assets they have, where all their money is and going.

We want to empower all women to have their own financial goals and to reach them regardless of their situation. We want to ensure that life’s challenges won’t throw you off course to achieving your desired lifestyle.

If you would like some guidance in taking control of your money, then please reach out and discuss your situation with the JBS Financial team.