The Recovery..

Banked, now what?  After financial settlement, what should you do with the money?  Not everyone gets a multi million dollar settlement, so how do you start rebuilding your financial life?  With so much focus on the procedure of finalising your separation, you may not have given yourself the time to contemplate what the next stage of life is going to look like.  Until everything is signed off, you may have missed the certainty of money in the bank, any support payments or contributions to children’s education, or even know if you’re going to have a house to live in.  However, once the settlement is complete, you may be faced with the reality of a very different future to what you were imagining a few years back.  So where do you start?  How to you plan for everything that’s coming up?  What’s realistic and possible?  Here are some steps to help you gather your thoughts and put plans in place for the future.

Understand your needs:

It’s highly likely that your expenses will have gone up and this will have a dramatic effect on what the future is going to look like.  Between you and your ex-partner, you may now have two houses to maintain and double the cost on other things such as children’s clothing and utilities.  Will you need to take out a mortgage, or rent a house? 

Do you need to buy a car? 

By understanding your expenses you’ll be able to start to map out your cost of living over the short, medium and long term.

Work out how much you have:

Now that you have an idea of what’s going to be leaving your bank account over the next few years (or more), it’s time to assess if you have enough income and assets to support you.  Ideally on a spreadsheet (but paper is ok!), you’ll have all your outgoings listed which will give you an annual cost.  Include capital costs such as a deposit on a property or car if needed.  Below this, put in your starting capital, any support payments and your income from work.  

The result will either be pleasing (you’ve got enough assets and income) or it will be scary (you’re going to run out of money).

Make adjustments:

We’re still in survival mode.  If the results of the above worrying you, it’s time to make adjustments.  Each family has different priorities and there isn’t a set formula of what you can cut back, rather it’s a slow process of experimenting.  Can you live somewhere cheaper?  Cut back on travel or other lifestyle items?  Are you spending too much on groceries?  It’s all test and measure.  You may find that trying to cut a modest amount off your grocery bill will make very little difference, but hanging onto your old car for an extra four years will have a dramatic impact. 

Put everything up for examination and see what the outcome is.

Look towards the future:

Depending on your age when you separate, you may need to consider the various life stages ahead of you.  The one life stage that often gets overlooked is retirement.  If you’re struggling through the earlier stages of life, it can be easier to ignore saving for retirement as it seems so far away.  But small adjustments over a long period of time can have a large effect on how much you retire with.  So while rebuilding your life and understanding how you’re going to get by, it’s important you give some thought as to the future as well.  Can you afford to salary sacrifice a little? Could you put aside a little bit to start a share portfolio? If you have capital from a settlement but don’t want to go out and buy a house, maybe you could look at a rental property?  There are many options around building wealth for the future that are available to you, but you’ll need to work out which ones are best for your specific situation.


Keep on top of finances:

It’s easy to let things slide with so much going on in your life, but it’s important you keep on top of your money.  Select a good super fund and ensure that you’ve got income protection insurance if it’s applicable.  Keeping bank and investment fees as low as possible and ensuring that you get the most out of every dollar that you have will all add up over time and make the above steps flow much easier.  If at the end you still don’t feel that you know where to start, look for an independent financial advisor to help you.  They can assist you by assessing your income and expenses, helping you to identify new financial goals and formulating a plan for your financial future.

ABOUT the Blogger:

Brenton Tong is the managing director of Financial Spectrum.

Brenton holds a Bachelor of Commerce with a major in Accounting and Law, as well as an Advanced Diploma of Financial Planning. He is completing his Masters of Business Administration and is enrolled in the Fellow Chartered Financial Practitioner programme (FChFP). Brenton is a Senior Associate Member of FINSIA, a Practitioner Member of the Association of Financial Advisers and a member of the Association of Independent Financial Professionals. In addition, Brenton is an accredited trainer for financial planners and writes part of the Continuing Professional Development syllabus for Kaplan.


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