How to manage your finances following a divorce or break-up
Getting divorced can be emotionally draining, but while your world may be turned upside down, it’s important that you don’t lose sight of your finances, as this can add another unnecessary layer of stress during an already stressful time in your life.
From managing your mortgage debt and assets to closing joint bank accounts, there are a few things you need to sort out before you can completely move on.
Consider the following strategies to remain in control of your finances following a divorce or separation.
Manage your mortgage debt
Depending on your situation, some of the most common ways to manage your mortgage following a divorce are to buy out your ex-partner, sell the property to your ex-partner or sell the property and split the profits between the two of you. It’s a good idea to speak to a conveyancer or a lawyer about the best option for your situation, so keep this in mind before making any decisions.
If you want to buy out your ex-partner, remember that issues may arise if you want to come to an agreement about the cash settlement after the property is sold, which is why it’s good to have legal counsel on your side.
You may need to refinance your home loan to pay out a settlement for divorce. If you do, your lender will take into account a number of factors before allowing you to do so, including proof that you have enough money to pay out your ex-partner if there isn’t enough equity in the property.
Re-configure your property ownership
Following a divorce, you may need to remove a name from the property title, which is typically done by the person being taken off the title.
To remove a name from the property title, you’ll firstly need to complete and submit a “Transfer of Title” form, which you can get from your relevant state or territory government department. You’ll also need to disclose the Torrens Title details of the property, the names of the people on the title and the share of the property being transferred, so make sure you have this information handy.
You’ll then be required to pay a fee for having the transfer form processed, the amount of which will depend on the state or territory where the property is located. However, to give you an idea of costs, in NSW, you could be looking at around $110 as a ballpark figure.
Removing a name from the property title can have significant legal and financial ramifications, so make sure you seek professional advice during this stage. For instance, a solicitor can help you draw up a formal separation agreement as part of your divorce settlement.
Close your joint bank accounts
You should close any joint accounts that you have, including savings accounts, credit cards and super accounts, and place all of your funds in a separate account under your name. Set up an automatic transfer so that your pay is directly deposited into your new savings/bank account.
Depending on the level of security on your account and whether your account has an “either party to sign” term, you should be able to close the account yourself by contacting your bank. However, if the account requires both parties to sign, you’ll need your ex-partner to sign off on closing the account too. In the unfortunate event that your ex-partner won’t cooperate, you can ask your bank to freeze the account until your divorce proceedings are underway.
Once you’ve closed your shared bank accounts, conduct a financial audit of your assets and debts to see which ones are still under joint ownership and try to close these as well.
Give your finances a detox
Going through a divorce can shake up your finances, particularly when it comes to managing your debts and ongoing expenses. While it may be the last thing on your mind, you should set aside some time to establish a new budget. List all of your assets, income and debts in an itemised spreadsheet (or even use a budgeting app if you like) so that you have a clear snapshot of your financial health.
If you’re unsure about how to structure your budget or how to create a savings plan, speak to a registered financial advisor who can help you get back on your feet.
Now is probably a good time to think about consolidating your debt so that you can save on interest costs. One way you can do this is by applying for a balance transfer credit card or merging short-term debt into one account.