When you’re going through a relationship break-up, you experience conflicting emotions and a long list of tasks to work through. But while finances may not be a priority, it’s an area that needs to be organised as you plan for your future.
In some cases, money isn’t something that’s focussed on during a separation. It’s understandable; it’s a time upheaval in your life and other areas, such as family and children, take priority. However, the financial aspect of a relationship breakdown is important. It can help you feel more in control, secure your short-term financial position and help develop a realistic path to the future you want.
Being solely responsible for money and your financial future can be a daunting prospect when you’ve had someone else to turn to in the past. If it’s a feeling you have, taking the time to assess your current circumstances and then plan your next move is important.
1. Taking care of the immediate
The first thing to do is to take care of immediate tasks. For some relationships, this will be relatively quick but others, where you’re married, have children, or jointly hold a mortgage, for example, it can be more complex.
Start by looking at the areas that will have a negative impact. If you have debt together, from a credit card to a mortgage, take the time to sort out who’s responsible for what payments. Miscommunication leading to defaults could affect your credit score and your future as a result.
With the urgent day-to-day tasks taken care of, you’ll be in a position to look at the bigger picture. This could mean selling a property, organising child maintenance payments or closing down jointly held accounts. Depending on your relationship and how you decide to proceed, some of these decisions may be somewhat out of your control. For instance, child or spousal support may be agreed within a court.
The process of financial separation can be draining. But it’s a journey that puts you in a position to take back control of your finances and hopefully start planning your future.
2. Setting out your priorities
Giving yourself time to grieve a relationship before you start making big decisions is important. But when you feel ready, it’s not just the finances that should be focussed on. Your priorities and aspirations should be the first consideration.
Following a separation, priorities and goals can change significantly. You may have had your life mapped out with your former partner. But is that path still the one you want now? It’s normal to be uncertain about what you want following a major life event. Giving yourself time to really think what you want from life is an important part of the financial planning process.
Jumping straight into the figures with little thought of what you’re saving for, what’s important to you, or where your life is heading can lead to inappropriate decisions being made. Of course, your plans need to be realistic and should factor in the current financial situation. This is where the next step helps you.
3. Formulating a long-term financial plan
Your financial plan should bring together aspirations and financial plans to create a blueprint to build a fulfilling life. It’s a process that’s about using money effectively to build wealth in a way that suits your lifestyle aspirations.
The use of cashflow modelling can help you visualise your wealth over time. Planning to purchase a new house after selling a family home? Or want to understand what your pension contributions will deliver in retirement? Cashflow modelling can let you see how decisions you make today will affect the future.
Remember, a financial plan created today isn’t necessarily still one you should follow in ten years’ time. Life-changing events and a change in aspirations will occur many times throughout life. Remaining engaged with a financial plan and what it’s working towards is just as important as laying the initial foundation down. As a result, frequent reviews are an area to build into your plan too.
If you’re going through a separation and want to understand how it could affect your financial situation, please get in touch. We’re here to help you make sense of your finances as they stand now and put a plan in place that reflects your goals too.