When married couples split up, one of the biggest questions raised is ‘Who takes the dog?’ The second biggest question is, of course, about the financial implications of separating.

As difficult and often heart-breaking as this situation can be, the reality is that around 30% married couples will divorce in Australia. And these divorces can have catastrophic financial impacts (some reports say up to $870,000 per couple), so it’s really important to talk about.

In this article, we’ll explore practical strategies and insights to help you navigate the financial aspects of divorce. From when to focus on budgeting to understanding division of assets, this is an introduction to the knowledge you need to take control of your finances and build a secure future. We are dedicated to helping our clients turn this challenging chapter into an opportunity for growth and financial empowerment.

The Financial Impact of Divorce

A Forbes report highlighted financial security as a key reason for marriage, with financial stress contributing to 24% of divorces. But while many people might feel relief after a separation is done and dusted, divorce can impact their health and financial situation for years to come. 

Post-divorce, individuals often face steep financial impacts. Older divorcees experience severe financial drops, with a 45% decrease in stardard of living for women and 21% for men. This can create real social issues and dramatically impact the quality of life for older men and women. The Separation Guide’s research shows divorce has a societal cost of up to $870,000 per couple!

As well as leaving both partners with technically half as much as they had before (with a 50:50 split), now the two households have twice as many bills and two individual retirements to plan for.

Research has also shown that women come out of divorce with more serious impacts than men, with a decline in household income of up to 30%. If children are involved, we can see a pattern of single-parent families with vastly reduced means (in Australia, 34% of single-parent families are in poverty).

That is why financial planning during and after divorce isn’t just about splitting assets; it’s largely about redefining your financial landscape. It involves creating a budget that works for your new circumstances, understanding how to split shared assets well, and ensuring you have a solid plan for future financial stability.

Divorce: Where to From Here?

Divorce is not just about legally ending a marriage or relationship. It’s essential to approach divorce with a clear and strategic financial plan to ensure that you are protected and can confidently move forward.

You also need to re-evaluate your financial goals to fit your new circumstances. Whether that is planning for your children’s education, securing your retirement fund, or managing day-to-day expenses, you’ll need to have a robust plan in place to make it work.

Your post-divorce financial situation may be significantly different. To understand what position you’ll be restarting life in, you’ll need to go through the difficult stage of reviewing each aspect of your finances. Work through each stage to make immediate financial decisions, and protect your assets before divorce proceedings begin.

• Organise your bills and paperwork.
• Decide on the split of assets and debts
• Update your accounts, will and super (including cancellation of joint accounts).
• Plan your living arrangements
• Restructure your budget and expenses.

These are also more specific aspects of post-divorce finances that you’ll need to work out, for example if you and your ex-partner have children together. From a financial perspective, this will most likely involve some kind of agreement around child support, and how care will be shared.

Child support involves financial payments made by parents who are no longer together, aimed at assisting with the costs associated with raising their children. Child support can also be paid to a non-parent carer—like a grandparent, legal guardian, or another relative—who has taken on the responsibility of caring for the children.

Organise Your Paperwork

Throughout your marriage, you would most likely have some shared bills and assets together. To untangle this financial web and get a clear view of what you need to action or negotiate, start by gathering and sorting all your documents.

1. Personal documents such as marriage certificate, birth certificate and passports
2. Bank and credit card statements
3. Insurance policies (health, home and contents, car, income protection, and life insurance policies)
4. Tax records
5. Car registration details
6. Superannuation details
7. Property or loan documents (deeds or mortgage documents)
8. Investment statements (for example, managed funds, share dividends)
9. Government benefit details and their requirements 

Negotiate a Binding Financial Agreement

There are a variety of financial agreements that might come into play in a divorce. These can include Binding Financial Agreements for asset separation, Superannuation Nominations, Child Support Agreements, and Spouse Maintenance Agreements. 

A main advantage of negotiating your own Binding Agreement is to avoid spending significant amounts of money in legal fees. It can also be much quicker than going through a prolonged mediation and court process. However, you should get professional advice from a family lawyer to put together a fair financial agreement, even if you are aiming for an amicable out-of-court settlement.

As soon as you separate, you can start working on this. Prioritise coming to an agreement on factors that will impact your life once you are divorced, like:

1. Housing – who will live in the house, and where the other partner will live
2. Children – how they’ll be financially supported and where they will live
3. Finances – how to create a fair split that will leave both partners able to rebuild their lives

Not every couple is able to have a clear and amicable conversation about these issues, but when so much is on the line, it is worth creating a strategy on how you’ll do this. Some techniques you could try are:

• Create a list of what needs to be worked through and share it with your ex-partner
• Ask for their buy-in on the topics to work through together
• Articulate your reasons for wanting to work together on this task
• Use your legally binding ‘Separation Agreement’ as a tool to help navigate the conversation

Update Your Accounts, Will and Superannuation

Act on separating your finances as soon as possible, to protect yourself and avoid situations that could do more damage to your divorce negotiations. For example, close joint account and credit cards, and remove your name from any financial commitments that you won’t be responsible for. Create a new bank account in your name.

For superannuation, if you have nominated your spouse as your beneficiary to receive your super and health insurance benefit in the event of your death, you might want to contact your superannuation provider to nominate someone else.

It’s also important to review and update your will, if you have one. For example, you may want to remove your ex-partner from your beneficiaries and ensure any finances go to your family or children. This is a very personal thing that you can approach in your own way based on your situation.

As an example, we had clients who divorced. They both chose to keep their ex-partner as their beneficiary because they would be the sole carer of the children if one of them passed away. However, if one of them remarries, then this set-up would most likely change.

Sort Out Your Mortgage and Living Arrangements

If you and your spouse have an ongoing mortgage, disentangling the mortgage arrangement can be complex. Make sure you have reviewed your outstanding loan balance, interest rates, monthly expenses, and the remaining time left on the mortgage.

Whether both names are on the mortgage or not, you’ll need to work together to determine the next steps. Options include: 

• One person keeps the home and refinances the mortgage solely in their name, paying out the other partner
• You could sell the home and split the proceeds.
• Continue co-owning the home according to the terms set in your Binding Agreement.
• If one person owns the house, you may need to make provisions in the Binding Agreement to ensure the other partner 

Whatever you choose, make sure you carefully assess your budget. Will you be able to afford a mortgage alone? Will you need to downsize or refinance for more manageable payments?

If you and your ex-spouse used to rent a property together, one of you might simply move out. However, consider if you can afford rent on a single income. If not, you may have to break lease, which can come with its own financial impacts.

If you have property and assets between the two of you, it is important to sit down and discuss how these will be divided fairly. Make a list of all your joined assets and debts, and get professional advice to split them up from a lawyer or Family Dispute Resolution provider. 

Restructure your budget and financial direction

We recommend that each partner completes a new budget for their individual income and expenses. If children are involved, it’s particularly important to have clarity on cash flow for the primary carer! 

Don’t forget to factor in your new housing expenses, separate utilities and insurances, and also saving for your financial future. You should also consider your superannuation and when you can retire in light of your new financial situation. 

Your divorce settlement will impact your financial wellbeing, but it is possible to rebuild with the right planning. 

Talk to A Financial Adviser

This is the right time to speak to a financial advisor if you don’t already work with one. Our financial advisers work post-settlement to help set you up for the future, while other advisors specialise in walking you through the divorce process alongside your lawyer. An advisor might focus on cashflow modelling, superannuation changes, insurance and income protection changes, wealth-building for retirement and housing strategies, helping you make informed decisions for your life post-divorce.

If you’re unsure about your new budget and cash flow, or if you’ll be able to create financial security for yourself going forward, it’s important to seek financial advice as soon as you can. If you’re unsure, a financial advisor can also help determine your eligibility and how to make the most of support payments from Services Australia.

On the other hand, if you find yourself with a large settlement, an advisor can review your entire situation and provide clarity on how to use the settlement to create choice and freedom in your future.

Useful Links

There are free helplines available such as the Family Relationship Advice Line (FRAL). FRAL can help you with free legal advice and information about services available to assist anybody with family relationship issues. There are also available free helplines for your local states such as legal aid, women’s legal service and aboriginal community legal service.

Bonus: The Separation Guide’s ‘Pool of Assets’ Calculator:  This is a super useful tool to go through your assets and liabilities, and identify what a fair split might look like.