One of the first things you need to consider after separation is how your finances are going to change. We’ve put together a short guide on how to split your finances when you get divorced.
Separate Your Banks Accounts
If you had joint accounts while together, closing them and opening your own accounts should be the first step when you’re getting divorced. Don’t forget to change pins and passwords you may have shared with your ex.
Assess Your Current Financial Situation
The next step is to stand back and make a general assessment your current financial situation.
Work out what assets you have – and include all bank accounts and other investments and fixed assets such as properties, vehicles, businesses, valuables, household goods and superannuation.
Then look at your liabilities – your mortgages, personal loans, credit card and any other debt.
This assessment will come into use later when your net assets are to be divided as part of the divorce settlement.
Advise Joint Debts
Advise lenders of any joint debts you may have had with your spouse. Joint debts include mortgages, rental agreements, bills, credit cards or other personal loans.
This might prevent your ex from accessing funds or services that might still be under your name or for which you might be liable.
Joint debt is that for which both parties are personally liable. If one party stops payment, the other might be held accountable for the whole of the debt. By advising lenders, you put them on notice if one party tries to access funds.
Create A Budget
Having done the above you should be able to work out a new monthly budget to match your financial position post-divorce. Income should include all earnings, salary and spousal or child maintenance, if any. Expenses include any ongoing mortgage payments or rent, utilities, debt repayments, school fees, insurance and you everyday supplies.
This should give you a fair indication of what your new financial lifestyle looks like. If your expenses are higher than your income, adjustments will have to be made. Either finding ways of earning more or cutting some of your expenses. Perhaps a combination of both.
By prioritizing and separating the needs from the wants you will be able to live within your means without risking an accumulation of debt.
And don’t forget to keep track of your expenses, so you know exactly where your money is going.
Review Your Insurances
Insurance is one area that can often be forgotten during the emotional strain of a divorce.
You will need to review all your policies and establish who pays for what. Ensure that you are still covered and you’re paying only what remains your responsibility after the divorce i.e. health insurance, sickness, vehicle, life and household contents.
Don’t forget to update your beneficiaries too.
Don’t Forget Your Super
Splitting superannuation is an extremely complicated matter where so many factors have to be considered before it can be split. Factors that will be relevant will include the future needs of each spouse, contributions made, earning capacities, age, children’s needs and length of marriage.
In many cases super forms an integral and often contentious part of divorce settlements and needs to be managed very carefully. It is highly advisable to seek professional advice on this matter. One thing that also needs to be made clear is that your super entitlements remain subject to the superannuation rules and, for instance, cash is only available on retirement.
Also update your superannuation beneficiary nomination for your super fund if you need to do so.
Discuss Child Support and Spousal Maintenance Payments
Child support is generally done by administrative assessment by the Child Support Agency – it is based on a set formula which can only be departed from by entering into Child Support Agreements – for which you will need legal advice. Spousal maintenance may also be significant points of contention and may need to be discussed and decided upon at family mediation as a part of the overall divorce agreement. Both spouses are strongly urged to agree to a fair level of support at mediation instead of taking it to the Family Court and letting a Judge decide.
There is no hard and fast rule as how spousal maintenance is calculated or awarded, as it depends on a wide range of factors. These will include, individual needs of the recipient/s, their ability to earn and the paying spouse’s ability to pay the maintenance.
Ready to finalise your divorce?
Family mediation can help you split your finances when you get divorced, and to move on quickly and affordably from your relationship. It’s less stressful and much more cost-effective than going through the Family Court.
Call Ian now for a confidential discussion about affordable family mediation in Perth on 0418 928 448.
