how do i start?

The end of a relationship can be a very emotional and frustrating time. This may feel like too much and there are so many things which you need to do! We start with a plan and the outcome is either exactly what we expected or, as often the case, things go awry.

When this happens, we need to be able to recognise that reality did not meet our expectations and so what we need is a new plan!

You will need a new plan about everything in life which has changed – your career, spending time with children, creating & deepening friendships, reconnecting with family and developing new skills.

First focus on the immediate things (like creating your own bank account) and then start to address the bigger more challenging items as you go. Most importantly, you need to have direction and support can be exceptionally helpful. There are only four resources you have at your disposal to address all of these parts of your life:

  • Time
  • Energy
  • Relationships
  • Finances

Financial transformation after Separation:

1. Cash Flow

Most separated clients we meet have seen their income drop. So how do we manage this to transform our finances? We need to go back to first principles and recognise that we have a basic lifestyle, and everything above this amount needs to be within our needs. We simply can’t keep costs the same if income drops significantly and now is an amazing opportunity to reflect on how you are spending.

A great way to work out how much you need to spend is to understand WHY you spend.

Once you know why you spend, next you need to work out all of your expenses. MoneySmart have a great budgeting tool for this (https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner). It’s crucial to have a budget because without it you will just be hoping that you are saving enough and likely to be fearful of investing money for the long-term. Most importantly, budgeting will give you the freedom that comes with knowing every one of your (predetermined) expenses have been accounted for. Goodbye guilt!

2. Insurance

Now that you know how much of your income is remaining (your surplus), let’s make sure that if something happens to your ability to work, your income keeps coming into your accounts. One of the most powerful ways to do this is through Income Protection. Whether you have mouths to feed with responsibility for your children or are now entirely reliant on your own salary, few people feel comfortable relying on their employer to keep paying salary beyond sick leave and annual leave entitlements. After an agreed period, an Income Protection policy will supplement a percentage of your income on a monthly basis for a specific length of time while you are unable to work due to an illness (physical or mental) or injury.

The other main forms of insurances are Life cover (if you die or are terminally ill), Total & Permanent Disablement cover (if you can never work again due to illness or injury), Critical Illness (a specified medical event occurs such as heart attack, stroke or serious cancer) & Child Trauma cover (protect you financially for the expenses if your child faces a serious medical issue). Refer to MoneySmart for a nice simple breakdown (https://www.moneysmart.gov.au/insurance/life-insurance) and speak to a financial adviser to learn about this in-depth.

Side note: If you want to receive unbiased advice then just make sure that the adviser you are speaking to does not receive commissions from providing you with insurance advice! Otherwise they will be incentivised to act the way they are paid and will sell you a product. 

3. Savings & Investments

You’ve set aside money for your lifestyle through budgeting (you have enough to live on and love), you’re protecting your finances with insurance (you’re protected if something goes wrong) and you (hopefully) have money left over. Saving money means you will eventually have enough for your planned expenses (for example: holidays, schooling, new car, starting a business, and eventually stop working).

You save money and then need to decide how to invest it. This is where it becomes crucial to understand your long-term goals.

Investing money means that your assets can grow over time and give you an income which doesn’t involve your salary or business earnings. How you invest depends on how soon you need to access your savings and what your attitude to risk is. Over the long run, high risk can be expected to have the chance of higher returns. For example, you can’t lose money on cash (except for inflation) but it will never be able to perform as well as quality shares can (but you can lose money on shares). The longer you are willing to not touch the money and the more comfortable you can be with volatility in the financial market, the more risk you can take.

By growing your investments, you will create your financial circumstances allowing you to truly be independent. You will be able to build security to give you peace of mind that you never need to rely on anyone else financially again.

4. Superannuation

You may be facing the choice of receive some superannuation from your ex or giving up your super to own the family home or other investments. Before deciding what to do, it’s valuable to understand what superannuation really is.

Superannuation is a form of investing. Depending on your income, super can be much more tax effective  than keeping investments in your own name and it will force you to put away money for the future. You just need to make sure that your investments are in line with your goals and that you do not need access to the money until you meet a “condition of release” (typically ages 60 to 65 for most young Australians).

A general rule is to have your super consolidated into a single account with low fees and high performing funds. Be careful when doing this, super accounts often have default insurance cover and closing the account will also cancel this cover – so don’t fall into the trap! There’s a lot of research to be done here! So start studying the super funds and reading the news, or speak to your financial adviser to work out how to invest your life savings.

5. Seek Help!

While trying to understand all of this, it is perfectly natural to feel drained of your time & energy. Many who have gone through separation want to seek education and help from professionals. Just make sure that your professional is incentivised to act in your best interest and not sell and insurance or investment products. Be sure to find one who will help you manage your finances in order to give you more time, energy and close relationships and not take that all away.

 MoneySmart have some exceptional tools and resources for you. Here’s a great checklist for anyone going through divorce or separation:


Harry Goldberg here!

Adviser, Mentor & Coach at Purpose Advisory, loving husband and proud empowerer of all whom I engage with to grow and become greater versions of themselves.

Mr career? Simply put, I have become immensely passionate about helping clients, not just with their investments or insurance products, but more so with helping them identify their goals and true purpose and empowering them to manage their finances to allow them to live the life they dream of.

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