4 money tips to survive the early days of divorce
Thinking of leaving? Make sure you complete these money steps first.
This is part one of a two-part financial survival series on how to divorce well, ensuring that both parties - and most importantly any children, emerge with enough money to live and rebuild. Read part two on how to split assets and financially recover from divorce, next.
The COVID-19 pandemic has seen a surge in the number of Aussies getting divorced. Data shows that 47,000 couples applied for separation in the 2021-22 financial year, and 50,000 couples sent in their paperwork the year before. That’s a big jump from the 44,432 applications in 2019-20.
And of course, the wait for a divorce is one year after the official separation date, which means there are tens of thousands of Aussies going through the process right now.
So, what money moves should you make first if you are headed for, or in the throes of, divorce?
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Here are four smart money moves I personally tested in my recent divorce.
1. Know the cost
No life decision should ever be made on the basis of money alone, but we’re all aware that financing two households with two incomes is far more difficult than when you were coupled up and sharing the financial load.
But, exactly how much extra? New figures from iSelect suggest that single-income Aussies with no kids – or SINKS as they’re also known – face a $7,691 higher cost of living than their double-income-no-kid counterparts: DINKS.
The YouGov research says it takes an average $2,198.93 per month to cover common household bills and housing costs, which is 41 per cent more than the $1,557.99 per month costs couples incur.
Like I said, splitting bills rather than splitting up works better for wealth.
And there is one demographic for which this is particularly bad: 65-year-old-plus single women. This group has the highest poverty rate in the country, according to repeated HILDA studies. And the Federal government’s latest Women’s Budget Statement says that single women who do not own their home are at greatest risk of poverty in retirement.
2. Work out what financial support you can get
The first piece of good news is that there is help out there, particularly if you are or will be a single with dependent children. You shouldn’t be too proud to ask for it either; the transition from a couple to a single is challenging and sometimes all you need is to ‘buy’ the time to get back on your feet and secure a reimagined future.
Jump on Centrelink and see if you qualify for any increased Family Tax Benefit, for starters – Part B is tailored for single parents.
But beyond this, the recent budget contained a big measure to help this growing cohort: it extended eligibility for the Parenting Payment (Single) to age 14, from the original cut off of age eight. About a decade ago, this benefit ceased when a child turned 16 but age 14 seems a happy medium and an age at which children are becoming less parent-intensive.
This payment is $922.10 if your annual income is less than $5,907 a year but phases down extremely slowly - you’ll get some of the payment until your income reaches $68,820.
Another welcome development is the ParentsNext check-in program to keep payments will be phased out and replaced by a less onerous program from July 2024. A parliamentary inquiry had found the requirements for appointments were akin to coercive control and impeded parents finding work.
Nine-in-10 people who receive these payments are women.
As part of the separation agreement, you should also negotiate a fair amount of child support if one parent earns more than the other. This can be the official rate as determined through Centrelink – note it is very low – or a more realistic private agreement for which I recommend you formalise in a consent order ratified by the court.
3. Look for other government support
If you are not eligible for the Parenting Payment (single) because your child(ren) are over age 14, and you aren’t working, you can apply for a JobSeeker payment. This is proposed to go up $40 a fortnight to 52.37 per day although it rises slightly with each dependent.
And for older singles, this year’s budget revealed another crucial measure in this year’s budget: Aussies aged 55 can now get larger JobSeeker payments (that cutoff was previously age 60), in recognition that many recipients are women and might face tougher financial times. This rate is supposed to go up too, pending senate approval, to $56.09, from $53.02 a day.
Don’t forget Commonwealth Rent Assistance is also payable to some on benefits, as well as one-off assistance like the new up-to $500 energy rebate.
Sign up for everything you can as soon as you can; the bit of admin could be well worth it.
4. Do an inventory of your assets and liabilities
If you are in the raw, initial stages of separation, make sure you think about the bank accounts you need to retain (or even gain) access. Hopefully, you and your former partner are still considerate of each other and don’t get start restricting, excessively spending or hiding money.
But, if you are worried about this, urgently review the permissions for joint accounts and consider changing these, if necessary, from “any to operate” to “both to operate”. For the latter, you both need to sign off to withdraw money, which removes the temptation for one person to raid the accounts.
It’s not just bank accounts either. You need to do a full inventory of all your investments, both joint and separate, including both of your superannuation balances, property and any shares, cars and all loans/liabilities.
Know what there is to share – and get a record – because the next task is to do so fairly which I’ll delve into in part two on how to split assets (and financially recover) from divorce.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.
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