Rebuilding your financial plan after divorce
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
Simply getting through a divorce is challenging and stressful. Yet it is also vital to rebuild your wealth and finances to regain a sense of control, security and peace of mind in your life. The good news is, there is hope after divorce – even if things will be different.
Below, our financial planners in Grantham offers a short guide on how to start rebuilding your financial plan after going through divorce. We hope you find this content helpful. If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
Establish your new position
When you were married (or in a civil partnership), you may have shared a house, a car, savings and investments. Divorce settlements, however, aim to split assets 50:50 – although this does not always play out in practice. For instance, only 15% of divorce settlements include pensions (despite making up 42% of household wealth), which often leaves divorced women in a worse financial position in retirement compared to men. If you (or someone you know) is going through the divorce process, therefore, be careful not to neglect pensions!
The state of your new asset base as a single person will depend on the final settlement. Maybe you were left with the family home, but with a large mortgage and few pension savings. In which case, you may need to make difficult decisions about your home. Can you still afford to live here or do you need to downsize to something more affordable? Doing this can help many people to make a “new start” in a fresh space, but can be difficult if you love your home and/or still have dependents living with you (e.g. children under 18).
Get a grip on your new finances
Of course, setting up a new monthly budget will be vital to ensure financial stability – particularly in the first year after divorce. Be careful not to assume you can afford the same spending level that you enjoyed before, especially if your household income is now lower.
Divorce is financially painful for all parties involved. The legal costs can be high and the two new households (after the settlement) now means two sets of energy bills, transport bills and council tax bills. If possible, therefore, try to settle disputes out of court (using a mediator, if needed) to avoid dragging on a costly court battle.
Stay-at-home parents may find it difficult to get back into work. Yet this is usually necessary to provide an income and start building up your own wealth again. Indeed, many people find that they have more focus and drive in their careers after divorce as they seek to provide a good life for themselves and their children.
For older people, it is no longer taboo (or rare) to work well beyond State Pension age if you need to support your pension income. However, bear in mind that you may be limited in how much you can save into your pension if you have already started taking benefits (which usually triggers the Money Purchase Annual Allowance – or MPAA – rules). You may need to consult a financial adviser to explore your options for retirement saving if your annual allowance has been limited to £4,000 a year due to MPAA. Be careful not to neglect pension planning as you move forwards in your new life after divorce. Although it is vital to plan for the present, you will need a reliable and sustainable income in retirement.
Lay out a new estate plan & protection plan
Before your divorce, your will (if you had one) was tied up with your former spouse’s assets, wishes and family members in mind. Now, however, your priorities will have almost certainly changed. Be careful not to delay drawing up a new will, therefore, to avoid your assets getting distributed in an unwanted manner (under the UK’s intestacy rules) should the worst happen. You may also benefit from setting up powers of attorney, which delegates decisions about your lifestyle and assets if you are no longer able (or willing) to decide about these things yourself – perhaps due to ill health which leads to loss of “mental capacity”.
Another important aspect of financial planning to consider – especially if you have children or other dependents – is your protection plan. What happens if you die prematurely or cannot work due to a serious accident or illness? Here, you might benefit from seeking financial advice on how to best incorporate life insurance, critical illness cover and/or income protection into your wider financial plan. These policies can help provide a lump sum or replacement income to you and your loved ones if disaster strikes.
Invitation
Divorce is a reality of life for many people, yet it does not mean the future has to be bleak. You can set yourself on a course back to independence and confidence.
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
