One of the biggest transformations that happens following a separation or divorce is the change in your financial circumstances.
This can sometimes involve getting a lump sum and being financially secure, but for many, it can result in finances becoming tighter and having to make sound financial choices.
If you’ve recently divorced, and need to get your finances under control, here are 6 steps you can take to help steer you onto the path to financial freedom.
Step 1 – Create Your Financial Freedom Plan
In almost all divorces, after all the legalities are settled and emotions have somewhat subsided, there is often one common outcome for both spouses: there’s less money to go round.
Even if you’re a high earner, there may be child and spousal support, outstanding legal costs, other unavoidable expenses, and for some, a lower income as well.
When all these problems are thrown together and seen holistically, it is so easy to be overwhelmed and unable to see yourself becoming financially stable ever again.
~Novel Serialisation: Heavens Fire~
By separating each problem and listing them in order of priority, you can begin to take small steps to tackle each issue one at a time. Whatever you may be feeling, there is no need to despair. It’s just time to create your personal financial freedom plan.
Step 2 – Set Up A New Personal Budget
Next, you need to take stock of your finances. This will give you a clear indication of what earnings you have and what your living expenses are.
Add up all your earnings, salary, spousal or child maintenance, investments, etc. and do the same for all your expenses. Mortgage/rent, utilities, school fees, insurances, credit card and all debt 0 make sure to include absolutely everything.
If your expenses outweigh your income, it’s still not the end of the world. It’s just time to make some changes.
Changes mean living within your means. There are only two ways of achieving that. The first one is to cut down on expenses and the other is to increase your income. An example would be to seek a better paying job, a second part-time job or improve your qualifications to enable you to apply for a higher paying job.
There may also be some scope to apply for maintenance orders in the Family Court, to assist you with meeting your expenses.
Most people are able to cut down on expenses and these sacrifices depend entirely on their own personal priorities. Separating the needs from the wants, is the first step in setting your priorities.
Step 3 – Aim To Be Debt-Free
Debt, particularly credit card, is the most expensive of all debt and should be the first one for you to work towards eliminating and becoming debt-free. Money that went into debt, can then be diverted towards savings or other needs.
Step 4- Start A Rainy Day Fund
One sure way of achieving financial freedom is to create a nest-egg for any unforeseen emergencies, such as retrenchment, unexpected car or home repairs, a medical emergency, etc.
Stuff like that happens to most people all the time. So it’s always a good idea to start “rainy day fund”, no matter how small, and even better if you put that in at the beginning of each month, instead of waiting to see how much is left at the end of the month – because there probably won’t be any.
Step 5 – Keep On Top Of Your Spending Habits
By keeping an accurate record of your monthly expenses, you’ll be able to keep on top of your spending habits, and see exactly where your money goes and where you could make effective budgeting changes.
Don’t bury your head in the sand and keep tapping that card. Go through your bank statement online at least weekly and look for things you could be cutting back on, especially if money is tight or you have savings goals.
Step 6 – Make Additional Superannuation Contributions
If you’re not already contributing to your superannuation, make every effort to start as soon as possible. While your employer may be making their legally required contributions to it, you can make personal contributions as well.
Understanding exactly how much one may need to put away each month to retire comfortably varies with everybody and is never an easy thing to do.
But even an extra $10 a week can add up quickly and help make you more comfortable when it comes to retirement. This is something we recommend you speak to an accountant or financial advisor about, to get advice on the best way to make this work.
Please note that nothing in this article constitutes personal legal or financial advice. We always recommend that you seek independent advice from a financial planner or accountant before making financial decisions.
BY Ella Hickman – Owner & Principal – Hickman Family Lawyers
Ella Hickman is the owner and Principal of Hickman Family Lawyers, one of the leading family lawyers in Perth.
She practices almost exclusively in family law in Perth and has a particular interest in parenting and children’s issues, matters arising from domestic violence in relationships, and property settlement cases.
She has a Bachelor of Laws and Bachelor of Arts (majoring in Psychology) from the University of Western Australia and has been practising as a barrister and solicitor since 2014.
Website: https://hickmanfamilylawyers.com.au/
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