Money mistakes to avoid when splitting up

This article is submitted to us by Helen Baker, an Australian financial adviser and founder of On Your Own Two Feet, part of the Career Money Life Supplier Community. 

Happily ever after has not panned out. The relationship you have invested time, emotions, energy and money in has been deemed – either by you or The Other One – to be irrevocably broken.

Divorce is something the Australian Bureau of Statistics says affects about 50,000 women in this country annually.

Most are in their 40s and have been married, on average, 12 years. Half will have children in tow.

Steps to take to avoid costly mistakes

Australian financial adviser Helen Baker is the author of One Your Own Two Feet Divorce: The Survive and Thrive Financial Guide.  Far from advocating how to take your ex to the cleaners — “revenge via the hip pocket may sound sweet,” she says.” But believe me, no one truly wins” — Helen offers practical tips to avoid money mistakes amid this most emotional time.

She takes a unique view of the end of a marriage, viewing it in four phases, not just ‘before’ and ‘after’. Helen maintains ‘pre-settlement’, ‘negotiation’, ‘post-settlement’ and ‘rebuild’ demand different actions and focus.

Here are 10 top tips to help you cope financially and avoid money mistakes when the words ‘It’s over’ are still echoing:

10 top actions to avoid separation money mistakes

  1. If you’re even contemplating leaving (or have any reason to believe it is on the cards), make sure you have an emergency fund. This is a pot of money you, and only you, can access. It is not a joint account. It is not a credit card. “Every woman, regardless of martial status, needs one. ‘Emergency’ does not have to be about Heartbreak Road,” Helen said.
  • Close any joint bank accounts as soon as possible.
  • Know the full extent of any outstanding debts on joint credit cards, loans and mortgages, utilities and leases. You can be held responsible and non-payment can impact your credit rating.
  • Work out what assets are in your name and joint names, and know what assets fit with your values and goals, moving forward? It doesn’t matter whose name the asset is in: all assets must be considered.
  • Never rely on income that may cease e.g. spousal maintenance, child support or a pension. 

Can’t buy kids love

  • Kids do (eventually) understand the difference between presence and presents. “Explaining that sometimes, as much as you want something, it just cannot be yours, right now, is an important lesson that will stand them in good stead in the future,” says Helen. “Money—stuff—does not buy love.”
  • Check who you nominated as the beneficiary of your superannuation and life insurance. Unchanged, The Other One could receive an unintended windfall, if you suddenly die.

Lawyers aren’t the only professionals you need

  • Seek expert financial advice about money matters, don’t ask your lawyer.  They’re neither trained nor authorised to give it. “A financial adviser will work with you to plan a secure financial future long after this uncertain time, taking into consideration your lifestyle now, and what you want.”
  • Restrain yourself from a celebratory spending spree and make your money work for you through wise, informed investments. “What difference does it make? Let’s say a conservative $6000 a year in interest repayments if, for example, you have $100,000 as a deposit on a new home instead of $200,000.”  Investments do work better over time; the more you can start with, the better.
  1.  Establish a holiday fund.  “When planned within your means, holidays are good for your physical and emotional health,” says Helen. “Start planning and saving: this is a positive thing to look forward to.”

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