In divorce, think financially, not emotionally

When a marriage falls apart, it can be financially devastating, particularly for women, writes Sally Patten.

It is widely recognised that two people who share expenses live much more cheaply than two people living apart.

But it gets much worse than that. An Australian Institute of Family Studies survey found that in the first year after divorce, 60.1 per cent of women experienced at least one form of financial hardship, such as being unable to pay the mortgage or rent on time. For women who remained married, the proportion of those facing some form of financial hardship was 19.7 per cent.

Women's earning capacity over time suffers too. Four years after divorce, women experienced a 2.9 per cent increase in income from pre-divorce levels, well below the 12.5 per cent rise in income experienced by men.

No wonder experts warn women to think financially, not emotionally, when going through a divorce. Decisions that are made at the time of separation can affect your financial wellbeing for the rest of your life.


Here are six things you can do to help make single life more palatable.

  1. Persist. As excruciating as it might be, you can't afford to give up on the financial negotiations in a rush to get everything finalised. Don't be pressured into making a decision. The financial aspects of the divorce should be one of your highest priorities.
  2. Know what your household is worth, including the value of the home, any investments such as shares and property, the value of your superannuation accounts and even accrued holidays. Also understand what outstanding debt you have, including credit cards, mortgages and personal loans. Look out for any hidden assets or debts.
  3. Calculate a minimum for how much you need to live on, so you have a base case for negotiations.
  4. Don't automatically ask to keep the family home just because it might provide stability for you and your children. Selling it and moving to a smaller place might help realise some cash that can be invested, or used to support a more comfortable lifestyle. Women in their late 40s or 50s might be better off getting hold of a portion of their spouse's super account as the contributions rules could limit the ability to build up retirement savings.
  5. Redraft your will, as divorce does not cancel out an existing will. Ditto with your superannuation death-benefit nomination, which determines who will receive your super savings when you die.
  6. If you receive maintenance payments, get life and disability insurance taken out for your ex-spouse. If he dies, at least you won't be subjected to further financial trauma.

Using mediation for divorce

Dealing with the finances proved one of the easiest aspects of divorce for Lisa Smith, ironically, for the very reason for the split in the first place.

"I didn't have children with my ex-husband," says Lisa, who prefers to use an alias because she does not wish her former husband or his family to know anything about her present circumstances.

"I have a good job that pays reasonably well. I stuck to my guns and made sure that I got what I wanted, which was enough to get my own home."

Smith, an advertising executive, was 35 and had been married for four years when she sought a divorce 10 years ago.

Her lawyer advised they use the not-for-profit Relationships Australia to reach a financial settlement because there were no custody issues and it was cheaper.

"It was a pretty good experience, actually," says Smith. "All they do is help you amicably come up with an agreement. It took us a few hours with a mediator and cost about $250."

The paperwork for the divorce cost them $5000.

Smith then sought the advice of a financial planner. "I thought, there's a realistic chance I'm going to be alone for the rest of my life and I didn't want to be one of those old women living in poverty."

She bought a two-bedroom flat in a good area and focused on paying off the mortgage before she turned 40.

Now, with a new partner and still with no children, she maximises superannuation contributions and has negatively geared a house in the outer suburbs.

"I urge any woman who is on her own in her early to mid-30s to get some trusted financial advice. You might be hit by a bus but you might not be."

Case study by Natasha Hughes


July 2016