The end of a relationship can be a very challenging time personally and financially. Make sure these money management mistakes don’t affect your finances.
Whether your marriage has ended in divorce or your partner has passed away, the emotional turmoil associated with re-entering the single world can turn your life upside down.
If you’re newly single you’ve most likely got a lot on your mind, but it’s important that you don’t let this distract you from taking care of yourself financially. There are plenty of common traps that the recently single fall into when managing their finances, and those traps can have a big impact on your bank balance.
Let’s take a look at some of the common mistakes made by newly single people and how you can avoid them.
Sticking to the same budget
If you’re newly single, now is a good time to re-assess your budget and work out whether it’s still reasonable for your needs. While your spending habits may have been fine when you had two incomes to rely on, now that it’s just you it’s important to work out just how far your salary will go.
It’s also essential to consider your overall financial situation and what assets you have access to. For example, if your partner dies, will you have access to any insurance payout? What happens to their superannuation balance?
Re-assess your spending and your financial goals based on your new circumstances, as keeping the same habits can quickly lead to financial difficulty. There’s a new economic reality in your life, and the sooner you adapt to it the better off you will be.
If your life has been torn apart by a breakup, sometimes a little bit of retail therapy might seem like the best way to ease the pain. With this in mind, try to rein in your impulse spending so that you don’t run up a hefty credit card bill that could take you months to repay.
The other way a newly-single person can overspend is that they continue to live a lifestyle based on the dual income that they used to receive, not the single income they currently earn. Remember that you’re now paying for everything on your own, so increasing your spending could be a big mistake that leads to higher levels of debt and less money saved for your retirement.
This may mean you need to make some tough decisions. For example, it may entail moving out of the family home because it is simply too expensive to maintain, but now is the time to be brutally honest about what you can and can’t afford.
Making decisions on a whim
If you’ve just come out the other side of a messy breakup or you’re still dealing with the grief following the death of your partner, it can be tempting to take a “Devil may care” approach to your finances. Newly-single people have an unfortunate habit of rushing into things without fully thinking them through, such as rushing into a relationship with the wrong person or committing a large sum of money to an ill-considered investment.
Although you may feel like this is the perfect time to just throw caution to the wind, that’s never a smart move from a financial point of view. Take a sensible and cautious approach to all your financial and investment decisions, especially the long-term ones, and you will set yourself up for a more secure future.
It may even be a good idea to put off any major financial decisions for a few months if possible. This will allow you to form a clearer picture of your money situation and make informed choices.
If you’re overcome with grief or depressed following a marriage breakdown, taking charge of your life and your finances can seem like a daunting prospect. If you’re not careful, the bills can start piling up and poor money management can quickly start eating away at your bank balance.
With this in mind, it’s important that you take the steps you need to get your life back on track. This could mean seeing a therapist, getting advice from a financial planner, or simply taking a step back for a little while to clear your head and plan for the future. This could be essential to help you avoid a future of debt and financial trouble.
Not updating your will
Marriage just ended in a very messy breakup? Even though you’ve probably got a lot to deal with, don’t forget to update your will. There’s a pretty good chance you will have changed your mind about who you would like your assets to pass to if something were to happen to you, so chat to your lawyer about updating your will to reflect your changed circumstances.
Not creating an emergency fund
If the loss of your partner or the events of your divorce has taught you anything, there’s a good chance it’s that you can never know for sure what the future will hold. From losing your job to suffering a sudden and serious illness, unexpected incidents and events can turn your financial world upside down. And if you were faced with an unexpectedly large bill or were suddenly unable to earn an income, would you have enough money in reserve to survive until you got back on your feet?
Having a rainy day fund is critical for all Australians, but particularly so if you’re newly single and still adapting to your changed financial situation. Putting a little money aside on a regular basis will ensure that you have access to crucial funds should you ever need them in an emergency.
Start your savings plan with a bonus saver account
Not setting new financial goals
Moving from couplehood to singledom means you need to re-assess your financial goals and plans for the future. Now is the time to take a look at the overall state of your finances and what you need to do to remain financially secure and save enough money for your retirement.
Your old goals will no longer be feasible, so throw them on the scrap heap and create some new goals. Be conservative with your plans and predictions and consider your long-term and short-term financial needs. This will help you come up with a solid and realistic plan for future financial success.
Not asking for expert advice
Managing your finances can be a complex process, and it gets even more difficult if you’ve just been through a messy divorce or if your partner has passed away. That’s why it’s often a good idea to get some advice from an experienced financial planner to make sure you get the most out of your money.
From managing your super and your long-term investments to splitting up assets after a divorce, a good financial planner can offer expert advice tailored to your unique situation. It doesn’t hurt to ask for a little help every now and then – in fact, it could be everything you need to set yourself up for a secure financial future.
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