As desirable as it may seem, there’s no magical crystal ball to tell us what life has in store.
No matter how meticulously we plan, unexpected negative events hit when we least expect it. The death of a loved one, illness or injury of a family member, relationship breakdown or a divorce, and redundancy, are just a few of the curve balls life can throw at us.
The emotional impact is immediate but financial implications often follow, and can be equally as damaging long-term if we’re not prepared for them.
Here are some of the steps you can take to take to protect yourself and your loved ones in the event of life-altering situations.
Notify relevant organisations
After the death of a spouse or loved one, it is important to notify the Australian Department of Human Services so that Centrelink, Medicare and Child Support records can be updated.
The Department also offers social work services, and a Financial Information Service – a free, confidential service to help you make informed decisions about investment and financial issues for your current and future needs.
Debt after death
When a family member dies, it’s important to speak with any lenders about how to deal with their loans.
Keep in mind, relatives and friends do not have to pay the debts of the person who has died unless the debts are in joint names. In most cases, debts can be paid by the estate.
When it comes to passing on assets to children or other family members and friends, a financial advisor can help you to carefully consider your options and avoid any pitfalls.
Think about superannuation
According to the Australian Department of Human Services you generally can’t access your super before you reach your preservation age, but in some circumstances (including specified compassionate grounds and severe financial hardship), the law allows you to access your super early.
The Australian Taxation Office provides information on early access to superannuation on compassionate grounds. You can also directly contact your super fund for more information.
Divorce and relationship breakdowns
Unfortunately, divorce is a reality for many Australians. According to statistics from the Australian Bureau of Statistics (ABS), the average length of relationship to separation is eight years, and to divorce 12 years.
Almost 50,000 couples divorce each year, and almost half of these divorces involve children.
A report released in 2016 by the National Centre for Social and Economic Modelling (NATSEM), showed it can take five-years for divorced couples to recover from the financial chaos of break-ups, with loss of income, home ownership, superannuation, and education savings for children often affected.
Financially, women are hit particularly hard. Research indicates that it is more difficult for divorced women with dependent children to recover from a split. Older Australians also feel the financial impact of divorce because there is less time to recoup savings before retirement.
My advice for anyone in a relationship is to be responsible for your own personal wealth. This may mean creating your own savings account and putting a certain amount away each pay day just for you.
Ideally, you should aim to have enough money in your savings account to cover your lifestyle (food, bills, rent, social) for six months without income.
Also, make sure you pay off debt and make additional superannuation contributions when you can, to ensure you’re covered later in life.
If your relationship ends, it’s important to get your head around your finances as soon as you can. List the assets and debt in your name and pinpoint joint commitments such as insurance, wills, credit cards, and superannuation.
When listing your assets, the Australian government’s stocktake calculator is a handy tool.
The Australian Securities and Investments Commission also provide a great online checklist to help you identify the financial elements that you need to consider in the event of a divorce or separation.
These include establishing a pool of money that only you can access, sorting out your mortgage and utility bills, rights in your rented home, seeking legal help (even if you are on good terms with your ex), collating relevant documents, working out your income and expenses, and sorting out debt.
Living on a single income
Divorce, separation, death, illness, injury, and job loss involves adjusting to a change in income. You may suddenly have to get by on one pay cheque.
Budgeting is extremely important. It’s essential to look to the future, no matter your age, and think about ways you can adjust to your new circumstances to secure financial stability for the long-term.
Goals are also essential when it comes to budgeting, it’s much easier to save when you have a goal in mind.
Establish a plan that outlines your financial goals and coping mechanisms and how you’re going to reach them. If you need help, it’s a good idea to consult a financial advisor or planner to guide you in the right direction.
Always seek advice
It is important to engage the help of a professional, especially when emotions are running high.
A solicitor can help with the equitable division of assets such as the family home and property, while a good financial advisor will give you the advice you need to move forward in a positive manner.
Mark Bastiaans is an Authorised Representative #296627 of Guideway Financial Services Pty Ltd ABN 46 156 498 538 AFSL 420367.
The information provided above contains general advice that does not take into account your financial situation, specific needs or objectives and is not intended to be personal financial advice and should not be relied upon without written advice from Guideway Financial Services Pty Ltd.