Divorce isn’t a happy topic but is an important one if you or someone you know is going through it – especially when it comes to the finances.
It’s common for people to accept that lawyers will likely need to be involved with the divorce process, to sort through issues such as homeownership rights and custody of children. It is less prevalent for people to consider help from a professional financial planner.
Yet getting this help can be hugely important. Divorce not only affects your legal status, your emotional well-being and relationships but also what kind of lifestyle you can afford in the years ahead. Given the huge financial implications, it can be very valuable to get an experienced, dispassionate set of eyes on your financial plan to make sure you are carried forward into the best possible financial future available to you.
Of course, it can be very helpful to consult a financial planner during the process of divorce. However, this is also beneficial once you have concluded the legal proceedings and completed the divorce. Perhaps you are at this stage, feeling like you have just come through a whirlwind of emotions and that only now, have you been able to catch your breath and ask yourself: “Are my finances secure, and do I have enough now and for my future?”
It is quite possible that right now, after what could have been more than a year of divorce proceedings and paperwork, that you simply want to step back from thinking about your finances. Whilst we completely understand this reaction, it’s important that you look after yourself and ensure your own financial security. You don’t want to later come across problems or financial hardship, which could have been prevented with a bit of organisation and help from a financial planner.
Here, we’ve compiled a short checklist which you might want to consider with your financial adviser, to sort through your post-divorce finances. Please note that this content is intended to inform and provide inspiration, and should not be taken as financial advice. To receive regulated, personal advice into your own situation, please consult a financial adviser.
#1 Bank accounts
Do you still have a joint bank account open with your ex-husband or wife? If so, then now might be the time to close them – unless you have a very good, agreed reason to keep these open. Just be careful; remember that joint accounts could become a liability which comes to haunt you later on if your ex runs up a large debt or overdraft.
On a similar subject, if you have not already done so then it might be a good idea to review your own bank accounts. This might involve opening a new debit/credit card account, for instance. It is probably best to establish these accounts first, prior to closing any joint accounts.
#2 Insurance
After the divorce, it is quite likely that you and your ex are now living apart. In light of this, it likely makes little sense to keep his/her name on insurance policies for your home or car, for instance, especially if you might be able to get cheaper policies by taking out newer, more relevant one.
Pay particular attention to your life and home insurance. For the former, you might have a policy which would pay out a lump sum to your ex if you died. Do you still want this to happen? If not, then consider getting a new policy! For the latter, are there items covered in the policy which belong to your ex, which no longer resides with you? Does it make sense to keep paying into a policy which covers them in the event of damage, theft or loss?
#3 Emergency reserve
As a single person, it is now even more important to ensure that you have a financial safety net in place. You cannot rely on a partner’s income, for instance, if you lose your job or suddenly face a large, unexpected expense. Consider building up an emergency pot to cover 3-6 months of living expenses, just in case.
#4 Other insurances
Following on from the previous point, it is quite common for financial advisers to hear their newly-divorced clients speak of feeling “financial exposed”. This is often because they believe that they will have few people to support them financially if things go wrong.
One pay to alleviate this worry is to consider taking out insurance to continue providing you with an income in the event that you lose your job or can no longer work due to illness or injury (i.e. “income protection” and “critical illness cover”). An independent financial adviser should be able to assist you here, helping you discern whether these policies are appropriate and finding you a good deal to cover your needs.
#5 A new plan
When you were married, your financial plan (assuming you had one) was likely tied up in your joint financial goals and vision for the future. Now, you will need to identify a new set of financial goals for yourself – which means crafting a new financial strategy and plan.
In particular, what are your new, desired objectives and lifestyle for your retirement? Are you on track to achieve these, and if not how can you now make appropriate changes to your finances and wealth in order to set you on course?
This is where a financial planner can be particularly helpful. They can assist you in reviewing your current situation, establishing where you are in order to help you identify the best route to get you heading towards your financial goals. They can make you aware of tax laws and investment opportunities which you might not have thought of, and point out common traps which you might not have spotted on your own.
If you would like to discuss your own situation with us and speak to a financial adviser here at WMM, then we’d be delighted to hear from you. Please get in touch today to arrange a free, no-obligation meeting with a member of our team, to start the conversation.
