A daunting part of a separation or divorce for most couples is sorting out the finances. We’ve listed our top tips for what you need to consider when divorcing or separating as financial disputes can be a major stumbling block in the divorce process and could take longer than the divorce itself.
This is the business side of divorce, and it may be the most important financial event of your life. The choices and decisions that you make will have an important influence on your financial well-being for many years to come.
1. Create a new budget
With your household income being impacted, it’s essential to go through your finances. Creating a budget sheet will help you to keep track of your incomings and outgoings. It will also help you to spot where you can make cutbacks. If you’re unsure about how to get started, there are many tools available online to help and all TFA clients have access to a budget planner in their secure client portal PFP.
2. Protect your credit score
You’ll be surprised at how many financial products and agreements you share with your ex-partner, from utility bills to mortgage repayments and credit cards, so it’s worth checking your credit record. Your credit report will list the details of every financial agreement you have. This will help protect your credit score from anomalous payments on the part of your former spouse.
3. Close joint accounts and open new ones in your name
It’s really important to make sure that all joint credit cards and accounts are closed, paid off in full or at the very least changed to either your name or your former partner’s. Not doing so could mean them being able to use your accounts, run up debt or use your savings. This could have a negative impact on your future. Going forward, make sure you open any accounts solely in your name.
4. Think about your pension
If you’ve just been through, or are currently going through, a divorce or separation, your pension is probably the last thing on your mind, but it’s essential for your future that you plan ahead – your future could depend on it. You and your partner may have built up a strong pension pot, so it’s important to pay particular attention to how this is divided, to make sure you are getting the best outcome. It’s particularly important for women who may depend on their husband’s provisions for their retirement, as they could be in for a nasty shock. Obtaining professional financial advice can be key in helping you to review your pension situation objectively, as well as helping you navigate through what may be uncertain territory during this emotional time. For more information, or to discuss your situation please contact us.
5. Don’t forget about your protection needs
If you already have life cover in place in the form of a joint policy, make sure you check the policy terms. Some include a ‘Joint Life Separation Option’, which means that the contract can be amended to cover both parties individually. Many policies also contain options that allow you to increase the amount of cover you have following life events, including divorce or separation, without needing further underwriting. You may want to consider increasing your cover if you have had to take on a new or larger mortgage or other debts. To understand your personal situation please speak with one of our independent financial advisers who will be happy to help you understand the cover you already have or help put in place the cover you need.
6. Make the most of your protection cover
Once you have changed your policy to protect you individually, it’s worth making use of any support that is offered. Many protection policies contain valuable support or counselling benefits that can provide vital help or advice if you are going through a divorce. This support can cover areas from financial to legal to emotional support. Protection can also play a key role in covering any maintenance liabilities for an agreed period, such as when children reach 18, in the event of severe illness or even death. Our advisers are available to discuss your situation independently and holistically.
7. Update your Will
Now that you are divorced or separated, your existing A Will is unlikely to be appropriate to your new circumstances. Make sure you update this as soon as possible to ensure that your wishes are followed.