If a relationship breakdown isn’t traumatic enough, working out how to split your finances could tip you over the edge. While running, tissues in hand, to the bank the minute after you split isn’t the best idea, here’s some tips from experts on how to break up your joint assets without losing your cool.
Financial Planning Association of Australia CEO Mark Rantall recommends acting fast to freeze joint bank accounts and separate property.
“My strongest advice if differences are dire is that you should move into splitting finances as quickly as possible,” he says.
That means working out what each party has brought in and how they’ve contributed – which will depend on how long the relationship was and whether there are children involved.
“The first thing is that people need to be able to operate and live, so getting bank accounts sorted out and enabling the other party to fund their lifestyle is important,” Mr Rantall says.
Splitting finances can be a complicated affair, so a solicitor might need to be one of the first people on your to-call list: You may need help separating (and sometimes finding) assets such as a house, investment property or shares and superannuation. This is particularly crucial if any of your joint assets are held in your partner’s name.
A financial planner will be able to help you work out what to do next, particularly if you are not used to dealing with money.
McPhail HLG Financial Planning managing director Anne Graham advises getting the right advice from “someone that will listen”.
“They’ll need to understand what the advisors are telling them and have the confidence to ask questions and say when they don’t understand,” she says.
If you aren’t used to managing money, then working out your income and getting your finances together is essential.
Ms Graham says that in most relationships, one partner will look after the money, so if you are not that person – it’s time to start.
“You need to understand what your situation is – are there loans, how much is in your bank account, what’s the credit card situation,” she says.
“You don’t have to spend a lot of time doing this, just enough to know what’s happening.”
You’ll also need to know how much your bills are, find savings and transaction statements, investments, tax records, insurance and super and it’s a good time to re-do your will.
When starting out anew, you’ll also need to look at your budget. Once you’ve got your finances together you can work out if you can afford the same lifestyle or work out what you’ll need to change. The Federal Government’s budget planner is a good place to start – canvassing your income, bills, financial commitments and other expenses.
If you haven’t reached the end of your relationship this advice may still apply to you. Splitting is easier if the work is done beforehand, says FPA’s Mr Rantall.
“You need to know what each person is bringing to the relationship and get a common agreement which can be an informal discussion or formal pre-nuptial agreement.
“I encourage people to have, at the very least, a discussion before they move in together and start sharing bank accounts. Unfortunately, when things go astray it’s more difficult to have those discussions.”