Divorce Financial Planning Checklist

Introduction

Embarking on the path to divorce can be both emotionally and financially daunting. As you navigate these turbulent waters, it’s crucial to arm yourself with a comprehensive financial plan that not only protects your interests but also lays the groundwork for your future stability. This guide aims to provide you with actionable steps and essential resources to take control of your financial situation before the divorce proceedings begin. With practical advice and supportive guidance, our goal is to help you make informed decisions, ensuring a foundation of financial security and peace of mind during this challenging time.

If you are looking for financial planning information for after a divorce then please click here

Understanding Your Current Financial Situation

Before initiating the divorce process, gaining a clear understanding of your financial landscape is paramount. This includes compiling a thorough divorce financial planning checklist and utilising a divorce financial planning worksheet to assess all assets, liabilities, and income streams. It’s the foundation upon which your financial planning before or during divorce is built, ensuring you have a complete picture of your financial health. This step is critical for anyone wondering, “Do I need a financial order for divorce?” as it sets out a helpful guide to keep you informed on some decisions during the legal process from a financial planning perspective. For professional legal advice please speak to a certified lawyer.

Gathering Finaincial Documents

Collect all relevant financial documents, including bank statements, investment accounts, superannuation details, and any debts or loans. This comprehensive overview is crucial for informed decision-making. We have a helpful step-by-step guide checklist for closing joint accounts that may be helpful to understand at this stage.

Download the Joint Account Closure Checklist

Assessing Assets and Liabilities

Accurately list all assets, such as property, vehicles, and savings, alongside liabilities including mortgages and credit card debts. Understanding what you own and owe lays the groundwork for future financial planning.

Estimating Living Expenses

Calculate your current living expenses to understand your financial needs. This includes everyday costs, bills, and any child-related expenses, providing insight into your post-divorce financial requirements. We have a helpful financial budget/tracking template that you can use to help you track the breakdown of your finances.

Budget Template Download

Taking these steps ensures you have a solid foundation from which to navigate your divorce, with a clear picture of your financial situation. This initial assessment is vital for setting realistic expectations and goals for your financial future.

Setting a Pre-Divorce Budget

Understanding your financial position thoroughly is the first crucial step in pre-divorce financial planning. This initial phase goes beyond mere number crunching; it’s about laying a transparent groundwork for the challenging journey ahead. By compiling a comprehensive inventory of your assets, liabilities, and income, you’re not only preparing for immediate legal necessities but also safeguarding your future financial well-being. This detailed evaluation, supported by tools like a divorce financial planning checklist and worksheet, empowers you with the knowledge to navigate the complexities of financial orders and settlements. Whether you’re assessing shared property, individual assets, or potential alimony and child support scenarios, a clear financial snapshot is indispensable for informed decision-making and strategic planning as you approach the divorce process. Creating a pre-divorce budget is essential for managing your finances effectively during and after the divorce process. It involves:

  • Assessing Income and Expenses

    Document all sources of income and list your monthly expenses. This includes rent, utilities, groceries, insurance, and any other recurring costs. The same template from above you can use to help you track the breakdown of your finances.

    Budget Template Download

  • Adjusting for Future Changes

    Anticipate changes in your financial situation post-divorce, such as housing costs or child support, and adjust your budget accordingly.

  • Cutting Unnecessary Expenses

    Identify areas where you can reduce spending to save money during the divorce process.

  • Planning for Legal Fees

    Set aside funds for lawyer fees and court costs. As you may be searching for financial planning during divorce assistance, make sure you have a caring, responsible and conservative financial planner to help you offer insights into typical legal expenses and help you budget for these costs effectively.

  • Emergency Fund

    If you don’t already have an emergency fund, start building one. Start by putting 10% of all you earn away into a separate bank account and aim to save for an amount that covers at least three months of living expenses.

By carefully planning your budget before the divorce proceedings, you can better avoid financial strain and ensure you have the resources needed to navigate the process.

Untangling Your Credit

As you prepare for divorce, separating and protecting your credit score becomes a critical concern. This phase involves proactively managing and safeguarding your financial reputation during and after the divorce process. Establishing individual credit accounts, closely monitoring your credit report for unauthorised activities, and ensuring all joint accounts are properly handled are foundational steps. The goal is to maintain a solid credit foundation, enabling you to secure loans, manage credit cards, and make significant purchases in the future with confidence. This proactive approach not only shields your credit score from potential harm but also sets a positive trajectory for your financial independence post-divorce.

Joint Account Management

It’s essential to communicate with your ex-partner about managing shared debts. Decide who is responsible for what and consider closing or freezing joint accounts to prevent additional charges (or, if you plan to do so at a later date, introducing a co-signing system for when either of you needs to withdraw money). Collaborating to pay off shared debts or transferring balances to individual accounts can protect both parties’ credit scores. See our joint closure checklist to help guide you through this process.

Download the Joint Account Closure Checklist

  • Consider the timing of separating joint finances

    This entails a careful and fair division of shared bank accounts, credit cards, and any joint debts. It’s important to compile a list of all joint accounts and debts to understand what needs to be divided. It might be worth scanning your bank statements from the past year so you don’t miss any when setting up alternative arrangements.

  • Update Beneficiaries and Authorised Users

    Make sure to update any relevant beneficiaries and remove your ex-spouse as an authorised user on individual accounts where necessary.

Seek out legal advice

This is especially important if you weren’t too involved with managing your household’s finances while you were together. A lawyer will help you understand what your rights and obligations are as you hammer out the details of your separation or divorce. You might also be able to receive free legal advice by contacting a community legal centre or Legal Aid agency.

If you can’t reach an agreement in separating your financial situations fairly, you might have to apply for a financial order1. This is an order made by the court after taking into account you and your partner’s unique circumstances, they lay out how property should be divided. Once a financial order is made, the parties involved must do everything required of them by the court.2

Keep in mind that there are time limits for applying to the court. Married couples will have 12 months from the divorce order (or a decree of nullity) to apply, while de facto couples will have two years from the date the relationship broke down.3

Sort out your Mortgage

Things can get a bit tricky if you and your ex-spouse were still paying off your home when you decided to separate. Your home forms part of the divorce settlement, and since the mortgage is secured over the home it generally also forms part of the settlement. Ideally, you and your spouse will be able to work out what you intend to do with it and have that included in your agreement. Some options include:

  • Sell the property and split the profits between you
  • Have one party buy out the other (in which case the mortgage must be refinanced)
  • Come up with a custom arrangement that suits your situation

Revise your Will

A divorce generally revokes a will but you might need to revise yours ahead of the divorce actually happening, otherwise any changes might get revoked when the divorce is finalised. Your ex-spouse will most likely feature prominently in your Will (as a beneficiary and possibly executor), so it’s a good idea to review things to make sure your belongings go where you want them to when you pass away.

Beyond your will, you ight also have to revise your:

  • Enduring Powers of Attorney

    which authorises someone to manage your financial and legal affairs on your behalf if you lose the capacity to do so yourself

  • Advance Care Directive

    which informs doctors and loved ones of the type of care or treatment you’d prefer if you’re no longer able to communicate or make the decision yourself

  • Enduring Guardianship

    which authorises someone to make lifestyle, health and medical decisions on your behalf if you lose the capacity to do so yourself.

Review your nominated beneficiaries for super and life insurance

It’s recommended that you review your superannuation and any life insurance policies you’ve taken out after a major life event, and separating from your partner certainly fits the bill. Death benefits typically aren’t covered by your Will, so it’s a good idea to check who you’ve nominated as your beneficiary and amend it if necessary.

Keep in mind that when you end a marriage or de facto relationship, your former partner no longer qualifies as your spouse. Generally, this means a beneficiary nomination for the former partner will become invalid, unless that person satisfies the definition of financial dependent or an interdependency relationship.

  • Credit Report Monitoring

    Regularly review your credit report from major credit bureaus to ensure accuracy and spot any unauthorised activities or errors. This vigilance helps you act swiftly in case of discrepancies, safeguarding your credit health.

  • Setting up Alerts

    Many credit monitoring services offer alert features that notify you of changes to your credit report. These alerts can be invaluable for early detection of potential fraud or misuse of your financial information.

  • Building Individual Credit

    If you haven’t done so already, start building your credit by opening accounts in your name. This might include a credit card, a savings account, or a small loan. Timely payments and responsible use of these accounts will help establish a solid credit history, contributing to your financial independence.

Protecting your credit score through these proactive steps is crucial for maintaining financial stability and access to future credit opportunities. This strategic approach ensures you emerge from the divorce process with your financial health intact, ready to embark on new financial endeavours with confidence.

Financial Planning with Dependents

When navigating a divorce, considering the financial impact on dependents is crucial. This encompasses child support arrangements, educational savings plans, and healthcare coverage. Strategizing for these future expenses requires a comprehensive approach:

  • Child Support Arrangements

    Understanding legal obligations and options for child support to ensure dependents’ needs are met.

  • Educational Savings

    Exploring educational savings accounts or trust funds can secure your children’s academic future.

  • Healthcare Coverage

    Reviewing and adjusting healthcare plans to maintain coverage for dependents without interruption.

Addressing these areas proactively helps safeguard the well-being of your dependents throughout the divorce process and beyond, providing peace of mind during this transitional period.

Planning for Immediate Financial Needs

In the midst of a divorce, it’s critical to address your immediate financial needs to ensure stability and security during this transitional period. Along with any costs incurred in the process of separating (such as lawyer fees and divorce application fees), you’ll have to continue paying all your usual bills and expenses, but without the benefit of an additional income. To make sure you can cover these, it might be worth seeking some private and personalised assistance to help you think about ways you might be able to boost your savings post divorce.

Here’s how to approach this:

  • Identify Immediate Expenses

    Make a list of upcoming expenses, including housing, utilities, and daily living costs. This will help you understand your short-term financial needs. Looking for ways to temporarily decrease spending on non-essential items and look for cheaper plans on things like electricity and internet. This might seem like a chore to begin with, but building up a savings buffer can be a big part of regaining your financial independence after splitting with your partner.

  • Create a Contingency Budget

    Develop a budget that accounts for potential changes in income and expenses during the divorce process. Include a buffer for unforeseen costs

  • Access Financial Assistance

    Research available resources for financial assistance, such as government benefits, community programs, or emergency grants, especially designed for individuals going through a divorce.

  • Emergency Fund

    If you don’t already have an emergency fund, consider starting one. Even a small amount set aside can provide a financial cushion and reduce stress during uncertain times.

This comprehensive approach will help you manage your finances more effectively during the divorce process, ensuring you have the means to cover your immediate needs and maintain financial stability.

Long-Term Financial Planning

Developing a robust long-term financial plan is vital as you prepare for life post-divorce. This plan should be designed to secure your financial future and address key areas such as retirement, investments, and any long-term savings goals you might have.

Assess Your Long-Term Financial Goals

Start by identifying your long-term financial objectives. Whether it’s securing a comfortable retirement, buying a new home, or funding education for your children, having clear goals is essential.

Retirement Planning

Reevaluate your retirement strategy. This might include reviewing your superannuation contributions, pension plans, and other retirement accounts to ensure they align with your future needs.

Investment Strategy Review

Analyse your current investment portfolio. Consider diversifying your investments to balance risk and potential returns, focusing on building a stable financial foundation for the future.

Savings Plan for Major Expenses

Establish savings plans for significant future expenses, such as your children’s education or purchasing a new home. Tools like educational savings accounts or high-interest savings accounts can be beneficial.

Seek Professional Advice

Consulting with a financial advisor divorce specialist can provide tailored advice to help you navigate the complexities of financial planning during divorce. They can offer strategies for financial planning before divorce and financial planning during a divorce and ensure you’re well-prepared for the future.

Educational Resources

Utilise our library of online resources and videos, attend workshops, and courses to enhance your financial literacy. Understanding the basics of financial planning, investment, and tax implications can empower you to make informed decisions.

By taking these steps and utilising the mentioned strategies and resources, you can lay a solid foundation for your financial future. Planning for the long term allows you to approach post-divorce life with confidence, knowing you’re prepared for whatever comes your way.

Resources and Support

Finding the right resources and support is crucial in navigating the financial complexities before a divorce. This step involves tapping into a variety of tools and professional guidance to ensure you’re well-prepared:

  • Financial Planning Tools

    Utilise budgeting apps and financial planning software to keep track of expenses and plan for future financial goals. Like the financial budget/tracking template we mentioned earlier.

  • Professional Advice

    Seek out financial advisors who specialise in divorce to get tailored advice for your situation. Websites of financial advisory firms often offer free resources or initial consultations. If you’d like to book a free consultation with us, we’d be happy to help.
    Book Consultation

  • Legal Assistance

    Access legal aid services or consult with a lawyer who specialises in family law to understand your rights and obligations.

  • Support Groups

    Joining divorce support groups, either online or in-person, can provide emotional support and practical advice from people who understand your situation. A few to consider are:

    • DivorceCare

      A recovery support group offering help and healing for the hurt of separation and divorce. They meet weekly in various locations across Australia.

    • Family Relationships Online

      Provides information and support for families going through separation or divorce, including advice on coping with family break-up.

    • MensLine Australia

      Offers support specifically for men dealing with separation or divorce, available 24/7.

    • Beyond Blue

      Provides support for dealing with separation and divorce, recognizing it as one of the toughest experiences one can face.

    • Family Relationships Online (Different Aspect)

      Offers guidance on going through separation, including information on legal processes and emotional support.

    • Relationships Australia NSW

      Provides support services for families going through separation or divorce, including counselling services.

  • Social Groups

    When going through hard seasons and change, finding new friends might be essential if you think you may, or have lost a number of friendship groups. Some avenues to consider are:

    • Meetup

      A platform that hosts groups for various interests, including social groups for people who are divorced or separated. You can find groups dedicated to outdoor activities, book clubs, dinner groups, and more, which can be great for meeting new people.

    • Eventbrite

      Offers listings for social events, workshops, and gatherings that can be filtered by location. Attending events related to your interests can help you connect with like-minded individuals.

    • Community Centres

      Many community centres across Australia offer activities, classes, and events that can provide social opportunities and support networks.

    • Social Sports Clubs

      Joining a social sports club or team can be a great way to meet people in a relaxed and friendly environment. Look for local leagues in sports like tennis, golf, bouldering or team sports like soccer or basketball.

    • Art and Hobby Classes

      Consider enrolling in art, cooking, photography, or other hobby classes where you can pursue an interest and meet people with similar passions.

    • Volunteering

      Volunteering for a cause you care about can connect you with a community of people working towards a common goal, fostering meaningful friendships.

  • Educational Content

    Leverage online courses, webinars, and articles focused on financial planning and divorce to enhance your knowledge and decision-making skills.

These resources and support systems are designed to empower you with the information and assistance you need to navigate the pre-divorce financial planning process confidently.

Conclusion

At the end of the day, even the most amicable of divorces can still be emotionally draining. Make sure you give yourself time to process events, and don’t hesitate to take a step back if you feel your mental health is being affected.

As we conclude our comprehensive guide to financial planning before divorce, it’s important to recognise that while the process can be challenging, it also presents an opportunity to build a strong foundation for your future. By taking proactive steps to understand your financial situation, protect your credit, manage legal considerations, and seek the right support, you’re not just navigating a divorce—you’re setting the stage for a new chapter of financial independence and security.

Remember, you’re not alone in this journey. Utilising the resources and support available, from professional advice to social groups, can make a significant difference in your experience and outcomes. Embrace this time as an opportunity for growth and empowerment, and know that with the right planning and support, you can emerge from this period stronger and more prepared for what lies ahead.

Your financial well-being is paramount, and taking the steps outlined in this guide will help ensure you’re equipped to face the future with confidence.

If there is any way we can assist you in your financial planning journey as you navigate the challenging process of divorce we would be glad to help you.

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