Separation and divorce are painful and exhausting – and also expensive. After a marriage ends, you need to restart your life with separate finances and a new strategy for moving forward.
When you start again, it’s not from zero, but it can feel that way sometimes. You are often working with fewer resources, which is tough, and things that once seemed simple are now complex. But until you press reset on your income, savings and long-term financial planning, you can’t really move on. Here are some strategies for restarting your life after a marriage ends.
According to Christine Van Cauwenberghe, Investors Group Vice-President of Tax and Estate Planning, the best way to restart is to ... start.
“I have had clients who are paralyzed by their situation,” Van Cauwenberghe says. “Once you’ve made the decision to separate, be honest with yourself and recognize it’s time to move forward. You’re no longer part of a team, you’re on you own. Take charge of your new life right away, otherwise you’ll put your financial self in jeopardy.”
Van Cauwenberghe says to start by separating your finances. “Cancel automatic deposits to joint accounts and credit cards where your spouse is a secondary card holder and open new accounts and credit cards in your name,” she counsels.
Once you’ve made the decision to separate, be honest with yourself and recognize it’s time to move forward. You’re no longer part of a team, you’re on you own. Take charge of your new life right away, otherwise you’ll put your financial self in jeopardy.
As well, if you changed your name but are now changing it back, start updating your identification right away. If you have younger children, make sure the paperwork at their school and summer camps has been updated with new phone numbers and email addresses, too.
Once you have a separation agreement and it’s been decided who gets and pays for what, start removing names from the ownership of properties and vehicles. The partner who has moved should issue change of address cards.
That’s easier said than done: some of these changes can be emotional. Perhaps you’ve agreed to give up the family cottage or sell off a beloved vintage sports car. Putting those assets in another person’s name can be difficult.
Rethink your budget
It’s likely that for the last few years you’ve been budgeting using two incomes. Now you’re spending and saving with just one. “You may need to reassess your lifestyle,” says Van Cauwenberghe. “You were sharing but you’re not now. You’ll have to pay bills on your own.”
Create a new budget for yourself. You may, at least in the short-term, have to cut back on certain expenses like pricey meals out with friends or mid-winter vacations.
Work with your advisor on creating a new financial plan. You may have to come up with a new timeline for retirement – you may have to work longer than expected now – or come up with new assumptions around pension plan payouts or RRSP savings.
Be aware of other changes
Van Cauwenberghe notes that the newly divorced may be surprised to find that they will no longer be receiving survivor benefits from their former spouse’s pension plan or that their medical benefits have been reduced or eliminated. “You may have been getting health and disability insurance through your spouse and now you’ll have to find your own coverage,” she says.
Also, update your will and the beneficiaries on your retirement accounts, she says, and life insurance policies which, by the way, you will have to start paying for by yourself. In many cases, the recommended beneficiary designation after a separation will be to “estate,” but you should confirm this with your advisors.
Restarting your life after divorce is difficult, but it also brings with it new hope for your future. “You will get through this,” affirms Van Cauwenberghe. “And when you do, by taking the right steps, you may find yourself in a better place, both personally and financially.”