Why create a financial plan after your divorce?

“To live, to err, to triumph, to re-create life out of life!”

James Joyce

Everyone’s divorce story is different. Maybe you’d been married for decades, maybe less than a year. Maybe you have children, or pets, or neither, or both. Maybe the divorce was your idea, or your spouse’s idea, or you both decided that separation was best. Maybe you’re relieved, or heart-broken, or a bit of both.

But however you got here, the question now is where do you go from here? The emotional healing may take time, especially if you have children who you now have to raise as a single parent. Coming to terms with your new reality may be the hardest step you’ve yet to take. However, there are some aspects of your new life that can be handled with more ease. Sorting out your finances may seem overwhelming, but with some professional help, the process can be made simple and easily manageable.

In this article we discuss the steps one needs to take to maintain your financial independence and how a professional can add better value and perspective to it.

Review your financials, both income and expenses

The first step would be to take account of your income sources. You could be earning your own income, or own properties that generate income, or you could be receiving alimony from your spouse. Then comes accounting for expenses that accommodate your new life. If you have kids, their expenses have to be accounted for as well. Expenses can recur annually, or more frequently in a year and your income need not always match the expense you have to bear at a given time.

A financial advisor can help you think through your lifestyle to gain a better understanding of your expenses. She can help you chart your expenses over the course of a year, match your income to your expenses and figure out how much you can save after everything is accounted for.

Redefine your goals and priorities

Starting a new life could mean relooking at the goals you’ve set for yourself. This could be educating yourself or learning a new skill, buying or renting a house or apartment, maybe buying a new car, and so on. If you have kids, their education and other future goals will have to be redefined as well. You may be sharing the goals with your spouse, or you may have to downsize the goals.

A financial advisor can help you define your goals, set priorities, and assign values to these goals. She can also help you figure out the best means of providing for these goals.

Create an emergency reserve

If this pandemic has taught us anything, it is to make sure you have a fund stashed away to manage emergencies. This is especially important if you have no one to fall back on in case something goes wrong. When you are single, even a small emergency can turn awry. Not having to worry about money in such situations can be a huge relief.

Your advisor can help you figure out how much you need to set aside, where best to set it aside, and how to maintain the fund so it is never depleted.

Review your health insurance

Having health insurance is an absolute must, especially in this day and age where costs are prone to inflate exponentially. If you already have a health plan, you should review it. If you don’t have one, you should definitely apply without delay. Even if you are covered under the same plan as your spouse, it is best to apply for a new one with the cover you need. You can then opt to continue the existing plan or remove yourself from it. And if you have kids, make sure you include them in your plan.

A financial advisor can help you assess how much you need, whether what you have should be kept or replaced, which plan makes the most sense for you and your family, and so on.

Ensure that the assets you own are in your name

Divorce can create a lot of confusion with regard to ownership of assets that will get split or transferred or inherited by both parties. In scenarios such as these, the best solution is to be process oriented. You make a list of everything you own and tick them off as and when you gain clarity on each. If you are keeping the house you stay in now, then you make sure your name is on the house deed. If there is a loan on the property, know how the loan is going to be repaid and put down everything you need to know about it.

Aside from assisting on the organizing and prioritizing, an advisor can also help you form the questions you should ask and understand the answers you get.

Manage your accounts & update your nominations

If you have joint accounts with your spouse, you might want to cancel them and open new accounts for yourself. This may include bank accounts, investment accounts, loan accounts, and so on. If you have kids, you will have to review the accounts they hold and understand who is responsible for which accounts.

Another very important step is to update nominations in all your accounts / investments. By default most of us tend to nominate our spouses when we open new accounts. This can be changed to your parents, your siblings, or your kids and if your kids are too young, you can appoint someone in your family as guardian.

Review the insurance on your assets

If you own property, or a car, or jewelry, or anything valuable, the asset is probably already insured. You need to ensure that the insurance on such assets are valid and up to date. If the assets are not insured, you should take steps to insure them as soon as possible. Whether the premiums for these policies are to be paid by you, or your spouse, you should ensure they are paid on time.

Operational tasks are treated differently by different people. Some enjoy the tasks while others find it difficult to cope with. Professional intervention can ensure that such tasks are dealt with, in the way they should be dealt with.

Take stock of your investments

Whether or not you were an active participant of your family’s finances in the past, you will now be responsible for managing your investments. Be it real estate, deposits, shares, mutual funds, or any other investment, you may have limited time and knowledge to handle them.

A financial advisor can not only help you manage them, but also ensure that your investments are working in your best interests. She can ensure that you don’t take more risks than you can afford or tolerate, and that your investments are always aligned to your goals.

Create a new will / estate plan

There is no denying the importance of writing a will. Especially if you have children and no partner to ensure that what is yours is passed on to them. You’d be surprised how easy it is to get the deed done if you have good professional help. If you’ve followed the steps above, then all that’s left to do is put them down on a piece of paper, will to whoever you want, and have it registered.

The intangible benefit

We’d like to round off this article with a mention of the intangible benefit that comes from hiring a financial advisor — building a relationship with someone you can trust. Someone who knows the ins and outs of your finances, understands your priorities and works in your best interests.

You cannot put a price on the operational assistance that comes with it either. With the industry still deeply rooted in paperwork and processes, it can be difficult for a novice investor to navigate. The challenge is not just in getting things done, but in doing it well.

“And so rock bottom became the solid foundation on which I rebuilt my life,”

J.K. Rowling