What happens to your money or your joint account following a divorce or separation? What cut of the financial pie will your ex-spouse be eligible to take? These are the commonly-asked questions when faced with such a traumatic and emotional life event, and as a result it’s important to know how to tackle your finances in lieu of a marriage break-up.
The first thing to do is to make a list of all your monetary possessions, including assets, bank account balances, credit cards and investments – as well as good and bad debts. This will enable you to calculate your net worth, particularly if your separation or divorce resulted in division of jointly-owned assets. You should also be careful you’re not saddled with your ex-partner’s bad debts, particularly if you have joint liabilities for credit cards or car repayments.
According to an Australian Institute of Family Studies study in 2006, divorced single men and women had lower levels of household assets than those who were never married and never divorced. Older divorced single Australians were also more likely to experience “material hardships”. In light of these facts, it’s all the more important to take control of your finances so you can move on with your life, especially if you had previously no control over finances during your marriage.
Contact your bank to close your joint account and transfer out your share to your own account. Ensure that your ex-spouse cannot access your money and update your new bank details with your place of employment, direct debits and credit providers. If you chose the option of ‘both to sign’ when opening your joint account, you will need to request that your ex-spouse sign as well in order to close the account. If you only chose the ‘either sign’ option, you can withdraw money independently of your spouse. However, this makes the account less secure as there is the danger that your ex-partner may have already withdrawn money without your knowledge.
Maintaining the cost of raising your children can take a toll on your finances once you’re newly single. If your children are under 18, you are required to attend a hearing to satisfy the court you are making required arrangements for your children, which can cost you up to $500 in addition to the $800 divorce application fee. Speak with your lawyer to get a sense of the payments you are required to make, and how much you’re responsible for. The Department of Human Services also has some useful resources to help you calculate your estimated child support payments.
It can be hard for new divorcees to readjust back to singlehood, particularly when it comes to spending and making bill payments – after all, you’re doing it alone rather than with someone else. This is why it’s crucial to set a budget to help you manage your debts, maintain savings and reach financial goals. ASIC’s Money Smart recommends you make a list of all your financial information: regular bills (utilities and rent), credit card obligations, investments, home loan details, property deeds, account statements, tax records, insurance policies, superannuation accounts, will/estate plans and contact details for your accountant and lawyer.
Once you’ve calculated how many payments you make a month, add this to your general living expenses (food, entertainment) and subtract this from your monthly income. The remaining amount may scare you, but it can also help you get your finances back on track. Read our saving tips to help you along this journey.