Your finances after a separation: 5 must-read tips

When a relationship ends, there can be an overwhelming sense of “what now?”, whether the breakup has been brewing for a while, or came suddenly out of the blue.

Naturally, a separation of any kind – be it an amicable “conscious uncoupling” or an acrimonious divorce – will impact your emotional wellbeing, but unfortunately your financial wellbeing can take a blow too.

A recent study conducted by Westpac found that two thirds of Australians considering a separation were hesitant to have that discussion due to the fear of having to start over financially.

However, the same study also found that working through your finances soon after a relationship breakdown can be seriously beneficial, with 84 per cent of Australians doing something “financially significant” within a year of their separation, most commonly sorting out their finances (33 per cent), paying off their debts (28 per cent) or taking a holiday (25 per cent).

To help kick-start your newfound financial independence, we chatted to Kate Holloway, a Westpac Financial Expert, about post-separation finances.

Are you going through a separation or divorce? Visit the Suddenly Single separation guide, filled with practical support, wellbeing advice and useful contacts to help support you through this challenging time.

1. Get to know your finances

It’s not uncommon in relationships for one partner to take the reins on financial management – paying the bills, setting budgets, lodging tax returns etc – but if that responsibility didn’t lie with you, day-to-day money management may feel outside of your comfort zone.

The good news is, it’s easy to build your financial confidence and, as cliché as it may sound, with financial confidence comes general confidence so there’s even more reason to get across it. “Do some short courses and refresh your skills,” suggests Kate. “A great place to start Westpac’s Davidson Institute, which offers a range of money management topics and tools.”

From budgeting basics webinars to tips on how to use credit effectively, the online learning tool can be used at your own convenience and operates to work to your schedule, not vice-versa.

Also, remember to gather any important financial documentation immediately after your split. It may not be the first thing you think of post-breakup, but you’re going to need copies of things such as bank statements, superannuation statements, a history of your employment and paperwork relating to any property that you own. Westpac have pulled together a helpful separation checklist with items to tick off to help you gather these documents.

2. Create a budget

Transitioning from a two-income to a single-income household can be incredibly challenging, especially if you have kids in your care.

Westpac’s recent study revealed that women are more likely than men to experience some financial problems when restarting their life post-separation, with 51 per cent of women having to live off a lower income.

In saying this, whether you’ve followed a budget in the past or not, it’s really important to take the time to draw up a spending plan now. It’s the quickest way to know where you stand financially and, as daunting as it may be, you need to know where you’re at before you can begin to plan for the future.

Start by outlining everything you currently earn – from your monthly income to your Centrelink payments – followed by everything you intend to spend, both on a daily and monthly basis. Also add in any outstanding payments or debts you still have with you ex-partner.

If this process seems overwhelming, Kate recommends reaching out for professional support.

“Speaking with your financial institution and using budgeting tools can help to set you up for future financial stability,” she says.

3. Protect your privacy

If you’ve been married or in a de-facto relationship, chances are you have one or more joint bank accounts with your partner.

If you only have a joint account, it is vital that you immediately establish financial independence during your separation and take all the necessary steps to protect your financial privacy.

“Having a strong understanding of where you stand in terms of your money is an important step to help you positively move forward financially,” says Kate.

In order to safeguard your money, consider opening a new bank account in your own name. If you already have one or multiple accounts in your name, protect your cash flow by putting temporary locks on existing cards, decreasing spending limits or even by setting up account alerts so you’re aware of when large sums of money are withdrawn from your account.

Top tip: Don’t forget to update pin numbers and passwords for your online bank accounts to make sure you have complete privacy over your money. If you do open a new account, share the bank details with your employer straight away to avoid any delays in your salary deposit.

4. Tackle any joint debt

As important as it is to organise your personal finances at the initial stages of a separation, you can’t afford to forget about the financial ties you have with your ex-partner.

“While every situation is different, creating a plan with your ex-partner to pay-off any joint personal loans and credit card debt can help to put you on the path to positive financial independence,” says Kate.

There are no set rules around splitting debts so try to divide debt based on the financial circumstances of both you and your ex-partner, taking into consideration care of children, health requirements and annual income.

Once you have agreed on a set repayment split, note everything in writing as a means of concrete evidence and then devise how and when you will make payment instalments.

If your split is less friendly or you are struggling to agree, it may be necessary to seek mediation or legal support as a means to work through your monetary division. Relationships Australia can offer additional advice and assistance on navigating this process.

It’s also a good idea to speak to your bank as there may be alternative ways to help pay off joint debt and they can help you to create a feasible plan to stay on track, such as a mortgage relief plan.

5. Consult a professional before dividing your assets

In a perfect world, you and your ex-partner will part harmoniously and have a seamless ‘who gets what’ conversation.

Unfortunately, in many cases, dividing assets is a complex and in-depth process. So before you go selling property, divvying up superannuation, changing your will or walking away from assets you have rights to, seek some guidance from a lawyer or finance expert.

Keep in mind that you’ll need records of income and evidence of how much you have contributed to the relationship when it comes to discussing the division of assets, and, if there are any children involved, you’ll be asked who will be the primary carer as this also impacts how your financial assets are divided.

Also, if you are getting professional advice, it’s a good time to discuss updating your will to reflect your new circumstances.

While the topic may feel like a future problem during this tumultuous time, it’s imperative to re-evaluate who you would like to benefit from your estate. Forgetting to do so could result in your ex-partner walking away with assets you are entitled to, such as super, or even items you had hoped to pass to your children, such as a treasured family heirloom.

Don’t forget to also include details of your superannuation, as it isn’t automatically included in your estate.

Ten tips on getting your finances in order when a relationship ends:

Get informed about your finances; download a proof of balance and put together a list of your own, your partner’s and your joint assets and liabilities.

Protect your privacy by changing passwords and pin numbers. For further protection, consider putting a temporary lock on cards, decreasing spending limits and setting up account alerts so you can keep an eye on balances.

Open or revert to a personal bank account.

Speak to your bank if you need immediate financial help in the wake of a separation.

Gather essential documentation, such as copies of any financial documentation from the last seven years. It can be tricky to know what information is needed and how to retrieve it, but there are free tools such as Westpac’s Separation Checklist to help you get started.

Speak to an expert about dividing assets.

Make a plan to pay-off any joint debt.

Set a personal budget.

Enrol in a finances course or upskill online, if needed.

Update your will.

To sharpen your finance knowledge, be sure to check out Bauer’s Financially Fit Females hub.