Rebuilding your financial life after divorce
Your divorce will have enormous repercussions on your life. In addition to the emotional impact, your divorce also has financial ramifications. Rebuilding your life financially after divorce is a difficult task.
Whether you were the main income earner in the household, or a stay at home mom, your financial status has changed as a result of the separation. To start rebuilding your life you need to start with a budget to ensure that you have an accurate idea about your new cost of living.
A divorce financial planner can assist you in this rebuilding phase to:
- Assess your income and expenses and develop a budget.
- Help you to identify your financial goals – it is likely that these will have changed now that you are divorced.
- Formulate a financial plan to help you secure your financial future through appropriate investing and life insurance strategies. This may incorporate any capital received from your divorce settlement.
The financial impact of divorce can set you back. This is particularly evident where divorce occurs later in your working life – you have less time to rebuild your financial status before retirement. By getting the advice of a financial planner experienced in divorce, you can make the most of a difficult situation and start getting your financial life back on track.
Where do you start?
- Debt Management
- Make sure that you have as little as possible debt after the divorce. This will ensure that you have a good credit record when applying for “good debt.”
- Good debt as an example would be a bond on your property. Always pay surplus cash or bonuses into your bond account. This will save on interest paid over a 20 year term and you will own your property sooner.
- You should have 1 or 2 times your monthly salary available as emergency cash. You don’t have to invest this money, simply keep it in your access bond, then do an internet transfer to your savings account, when the emergency arises.
- A new dress for a wedding is not an emergency.
- Always stick to your budget.
- If you do receive maintenance for your children, make sure that you have one month’s maintenance in a savings account, should your ex default.
- Wealth Creation
- Now that you are on a single income again, you need to re-think your retirement. Don’t count on Mr Right to help you with this.
- Pay your debt off as soon as possible. If you are able to settle a 20 year bond within 13 years, then you will have the amount of your bond re-payment to invest towards your retirement.
- Never cash in your pension or provident funds.
- Should you have a divorce claim on your ex-spouse retirement funds, make sure that you transfer your benefit as soon as you have the divorce order.
- Risk Portfolio
- If you find yourself suddenly single, you will soon realise that with a single income your risk in terms of liabilities almost doubles.
- Life cover / severe illness and disability cover is very important.
- Life cover will ensure that your children will not be left destitute in the event of your death.
- Severe illness cover will also ensure that you have a better chance to get well and also without losing wealth.
- Should you become disabled make sure you are covered for disability of at least 75% of your salary.
- Always change your beneficiary nominations after your divorce or as soon as you decide to divorce. This also applies to your group benefits.
- Insure your maintenance with a life and disability policy. This should be agreed on and written into your divorce settlement.
- Will and Estate Planning
- Draft a new will within 3 months after the divorce date. Should anything happen to you and you did not amend your will, all your assets will revert to your ex-spouse.