When going through a divorce, financial stress is a major issue for many people. It only exacerbates the emotional upheaval of the process. The uncertainty about the new future raises one key question: will I have enough money to maintain my lifestyle after a divorce?
Start planning as soon as possible
The first step to securing your financial future after a divorce is to involve your wealth manager as early as possible. The sooner you can start your financial planning after a divorce, the better. Inevitably, there will be fundamental changes to your financial situation.
It is also especially daunting to take control of the financial planning if you haven’t taken the lead on this during your relationship. This is where a wealth manager can be very helpful. The role of your wealth manager is to guide you through planning for your future, ensuring you have enough to maintain your lifestyle.
Determine how much you need
To start planning for your future, your wealth manager would typically do the following:
01 Establish your existing assets, income and expenditure
A very important starting point is to have a very clear understanding of all your assets, income and spending. All assets – including property, investments and business assets – are taken into account at this stage. Your wealth manager can take an independent view on the lifelong implications of your financial decisions that need to be made. Even if your divorce settlement is not finalised yet, this analysis is valuable to help you understand how the division of assets will influence your planning.
02 Determine your objectives and needs
The next step is understanding what your objectives and needs are. This includes needs such as financing children’s education, buying a second home or gifting money to your children.
03 Modelling your cashflow
Based on your objectives, needs and existing income and expenditure, you can now do cashflow modelling to understand how much money you need to maintain your lifestyle well into the future. The cashflow model is based on a series of assumptions, which includes aspects such as inflation and economic growth, as well as tax considerations. Based on this, your wealth manager will have a view of how much risk you need to take in your investment plan to meet your needs, and whether you need to restructure your assets.
04 Create an investment plan
The next step is to develop a plan for ensuring your assets work as hard as possible to keep up with inflation and the growth you need to achieve your goals. This may include restructuring some of your assets to optimise your portfolio. Some of your existing investments may be in inappropriate structures for your circumstances and needs.
05 Continuously monitor your plan to ensure it remains fit for purpose
Once your plan is implemented, your wealth manager continues to monitor how it is working for your needs. There are regular report-backs to explain the performance and why your portfolio is invested in certain assets. While you have an investment plan, it should be flexible enough to be adapted as your circumstances and needs change over the long term.
Start building a trusted relationship with a wealth manager early on. This will give you peace of mind during a difficult time.
Find out how we can help you plan your financial future after a divorce. Get in touch here.
