I think most of us are aware that there are definitely negative financial consequences associated with divorce.
However, the full ramifications are perhaps more extreme than many would have expected, especially for marriages with children.
According to the Australian Bureau of Statistics (ABS), divorced parents aged 45-64 have 25 per cent less assets compared to their married counterparts.
A divorced mother has 68 per cent less super than a married mother, whilst a divorced father has 60 per cent less super than a married father.
It is clear that divorce severely impacts our wealth and is likely to hinder our lifestyle both during our working life and in retirement.
Unfortunately, there is no easy solution to dealing with the negative financial impacts of divorce, but there are a few traps that can be avoided.
It is a common error in the separation period for both parties involved in a divorce to neglect their finances. This can be both deliberate and unintentional. At times, either party can be reluctant to take care of certain financial obligations feeling that the other party (or at least both parties) are responsible. Also, some things are just overlooked as they don’t seem important at the time.
If you are going through a separation, as hard as it can be at the time, endeavour to work together to stay on top of your finances as best you can. It is likely to benefit both parties in the long-term.
Again in the easier said than done department, the more amicable the assets are split, the less it will cost in legal fees to accomplish. Keeping the direct costs of divorce to a minimum will again help both parties in the long-term.
Once the divorce is finalised and you are starting to rebuild, your financial circumstances are likely to bear little resemblance to your pre-divorce position. You will now be on a single income; you will have a different set of expenses and most likely vastly different goals.
It is advised if you experience a divorce that you completely restructure your financial plan and start working towards a secure future as soon as possible.
Alex McKenzie, Future Financial Services
Alex McKenzie is a financial planner, and the owner of Future Final Services in Penrith. He is a graduate of Western Sydney University.