Money - Recovering from Divorce
Getting divorced, even in the most amicable circumstances, can be one of life’s most stressful - and expensive - events. Being prepared for the financial impact ahead of time can help you recover and move on with life in a more confident fashion. While divorce or ending a civil partnership is never easy, understanding your finances is one of the toughest aspects. Here’s how to get started:
Plan for Your Financial Future
Start by creating a clear picture of your financial situation. This means identifying all assets and liabilities, including your home, cash savings, investments, and pensions. Legal advice can help you understand your rights and responsibilities, but the following tips can guide your financial planning:
Create a Budget
Developing a budget as a single person is essential. Review your current income and expenses, and create a projection for the future. For example, if you’re receiving a lump sum as part of your settlement, ensure it’s invested wisely to maintain its value over time. Consider these key components:
Saving for Retirement: Ensure you’re building a nest egg for the future.
Paying Off Debt: Prioritize clearing high-interest debts.
Emergency Fund: Build a reserve to cover at least three months of living expenses for unexpected costs like home repairs.
Income Protection: Protect yourself against long-term illness or disability.
Life Insurance: Safeguard your loved ones by covering financial responsibilities like a mortgage or care for children or dependents.
Evaluate Your Assets
Your assets may include property, savings, investments, pensions, businesses, or valuable collections. Each of these needs careful consideration during and after the divorce process:
The Matrimonial Home: Decide whether to sell, transfer, or retain ownership.
Joint Finances: Separate joint accounts and liabilities.
Investments: Understand potential tax implications and how to manage them.
Pensions: Review and potentially revise your beneficiaries.
Update Your Will and Legal Documents
Don’t delay updating your will, power of attorney, and any third-party agreements. While your will remains valid until your divorce is finalized, some details might need adjusting afterward to ensure your wishes are honored.
Embracing a Fresh Start
Now that the legal proceedings are behind you (whew!), it’s time to look forward. Whether you’ve received a lump sum, a share of your ex-partner’s pension, or need to rebuild your financial footing, here are key steps to consider:
Review Your Budget: Revisit your post-divorce budget to ensure it aligns with your new financial reality.
Save Smartly: Use tax-efficient options like Individual Savings Accounts (ISAs) or self-invested personal pensions (SIPPs) to grow your money. Both accounts offer tax-free growth, and the government provides tax relief on SIPP contributions.
Get Advice: If you’re unsure about your financial decisions, a financial adviser can provide tailored guidance.
Resources for Your Financial Journey
Retirement Planning: Use tools like retirement and pension calculators to assess your savings and withdrawals.
Investing Wisely: Consider ISAs for accessible savings and SIPPs for long-term growth.
Specialist Support: Speak with different retirement specialists and attend free seminars to educate yourself and for free guidance or personalized advice.
Taking control of your finances after divorce may feel daunting, but with careful planning and the right support, you can create a secure and fulfilling future. Whether you’re managing a settlement, rebuilding your savings, or planning for retirement, each step you take brings you closer to financial confidence and independence.
