There is no doubt that experiencing a divorce can turn your life upside down, both emotionally and financially. For many, it is a devastating and traumatic event that can be messy, protracted and expensive.
Managing your finances after a divorce can, therefore, be an overwhelming and daunting task, leaving you uncertain and anxious about your future, especially if your household income has taken a huge hit.
For some, however, this change in circumstances can be liberating, presenting the perfect opportunity to take back control and achieve financial independence.
Here are 6 top tips to help you get your post-divorce finances back on track.
Prepare a Budget & Plan of Action
Having a budget and financial plan of action in place is key to managing your finances after you divorce.
- Keep good records of your income and expenses
- Check the benefits you may be entitled to now that you have separated, such as reduced council tax, adjustments to tax credits or child benefit.
- Collect statements of all your outgoing expenses such as rent/mortgage, utilities etc.
- Aim to identify and eliminate any unnecessary expenditure.
- Identify where any savings and investments can be made.
- Think about financial planning with your future in mind and the ways in which you will fund your retirement.
- Think carefully about the long-term affordability of staying in the matrimonial home and the financial consequences of taking on a whole mortgage by yourself, especially if it is going to over stretch you financially.
- Consider the benefits of downsizing to a smaller property with smaller mortgage and running costs.
- Consider opting for a share of your partner’s pension rather than focusing entirely on the property you share.
Review Bank Accounts
It is a good idea to cut all financial ties with your ex as soon as possible.
- Contact your bank to protect any joint bank accounts that you share with your ex. You will want to prevent your ex from emptying or closing accounts or running up any overdraft facility that you will be liable for. You might want to consider closing joint accounts or putting a freeze on them until you and your ex can agree on how to manage things, going forward. Get in touch with your bank and they will be able to advise you on the best course of action to take.
- Secure your online banking by changing passwords and PIN codes that your ex might know or can easily guess.
- Close any joint savings accounts and split the assets
- Open a separate bank account in your name only, so payments can be made directly to you.
Deal with Debts
Making an effort to pay off debts is a sensible way to secure your personal finance going forward.
- Cancel any joint bank credit cards. Try to reach an agreement with your ex on any outstanding balances and have agreed amounts transferred to new cards in your separate names.
- Deal with outstanding debts that are in your name. You will be responsible for all debts in your name, even joint debts.
- Let your lenders know that you have separated or divorced.
- Communicate with your lenders to let them know if you are experiencing any problems with loan repayments so they can help you with a plan going forward.
- Seek specialist financial counselling to help you put a plan in place to deal with any debt issues.
Investing in a savings account is a good way of creating finance to fall back on should unexpected expenses arise further down the line.
- Allocate a regular portion of your income to your savings which will help you to avoid falling into debt and help protect your financial future.
Sort Mortgage, Rent & Utilities
Taking charge of your mortgage, rent and utilities will help protect the roof over your head.
- Inform your lender that you and your partner have separated and work out a plan to ensure that mortgage repayments are covered.
- If you are renting, let your agent or landlord know of your separation and have the lease put in your name only. Again, work out a plan to ensure that rent payments are covered. If you intend to move out of a rented property, let your agent or landlord know and have yourself removed from the lease. You may also want to remove your name from the utilities for the property.
- If you are staying in your property, ensure that all utility bills are in your sole name. If you are moving, ensure your name is removed from the utility bills for that property.
Make or Update Your Will
- If you haven’t made a Will, now would be a good time to visit a solicitor and make one so that your exact wishes are known and adhered to. This is especially important if you have children that you are responsible for. Doing this will give you the opportunity to decide how you want your assets divided and who will be appointed guardians of your children. If you have already made a Will, you may want to update it or make a new one that matches your new circumstances.
- If you have a Power of Attorney in place you may want to review it and ensure that it is updated now that you have divorced.
Claire graduated in 1990 and joined HCB’s Bedford office in 1993; she was made a Partner in 1997.
She has always worked in family law dealing with children (private law), divorce, injunctions, financial matters and separation. She is an accredited specialist of Resolution (formerly known as SFLA) and a trained Collaborative lawyer.