Your financial to-do list if you’re heading toward separation or divorce

No matter how it happened, whether you knew it was coming or not, if you find yourself suddenly single, it’s important to understand your new financial reality — and fast. 

Follow this financial empowerment checklist, especially if you weren’t the lead money manager in the relationship.

Will you have more, less or the same money?

Unlike Maya Rudolph’s billionaire character in the new series “Loot,” newly single people tend to have less money going forward. Carefully assess what’s going to be your new reality when it comes to savings, income and investments. Will you have more, less or the same money? Depending on your situation, there might be a business being sold or refinanced, an insurance payout, a whopping pile of debt you now need to sort out, support payments (either way), a steady paycheque — or not. 

Include the right advisers in your investigation process

Whether it’s a financial planner, lawyer, accountant, insurance adviser or even your therapist, make sure you’re meeting with these pros regularly to understand what’s ahead for you, such as a major tax bill, how to update your CRA My Account portal with your new status, what to change in terms of your will and beneficiaries, when an insurance payout might happen, the implications of selling or refinancing assets, etc. These pros will help you decipher tricky documents and suggest what’s needed for your go-forward financial well-being. 

It’s OK to switch advisers, especially if you don’t like them. Before you do, get a trusted referral, or even a few, and interview the candidates before you hire them.

Make a net worth statement and review it with your financial adviser

Assets are things that you own, which grow in value, such as a home, investment properties, RRSPs, TFSAs, savings accounts, pensions or a business. Liabilities are debts such as a mortgage, home equity line of credit, car loan, personal line of credit, a credit card balance or money owed to friends and family. Make a list of all assets and liabilities and what each is worth (not the monthly payments, the total value). Then subtract the total amount of liabilities from your total assets to determine your current net worth. Your net worth is a key measure of financial health, and the goal is to preserve it. It ultimately becomes your retirement nest egg, and might need to be accessed pre-retirement depending on the kind of suddenly single situation you find yourself in. 

Sometimes in challenging separation and divorce proceedings it can be hard to pull together a clear picture of net worth. Thankfully there are processes in place to help couples accurately disclose the full financial picture; then divide things. A good lawyer and/or mediator can assist; many have a Certified Divorce Financial Analyst (CDFA) on their team to support.

Understand your monthly bills and automate as much of them as you can

Bills and payments are different from liabilities because you need to pay them in regular intervals like quarterly, monthly or biweekly. These can be regular fixed amounts, like child care or rent, or they can vary depending on how much you use a service, such as electricity. 

List each bill and when it’s due (don’t forget subscriptions and memberships). If you previously paid bills for the household separately and now you need to pay the whole lot of them on your own, make sure you contact the providers to set up pre-authorized debits. Automating the payments will help ensure you don’t forget to pay anything.

Using this information from your bills and payments, prepare a monthly budget. This should reflect all the income and expenses running through your bank account every month. For now, while you’re resetting, try not to make any major changes here until you’ve spoken to a financial adviser or money coach who will help you target the right changes, like trimming back your subscriptions or renegotiating your insurance. If your expenses are more than your income, you run the risk of going into debt. There are only two solutions to that; cut back or increase your income.

A big money mistake I see often is newly single people not adjusting their lifestyle and costs based on what they can afford, usually on a smaller income. Or stopping all retirement savings or not accounting for the debt they now must pay, solo. Chances are that lifestyle changes are ahead, and will need to be accounted for in your budget, including money for your well-being.

Read insurance policies, lease agreements, employment contracts, mortgage terms and more 

These financial agreements and policies renew at various times and you’ll want to be prepared to either renegotiate, renew or move your business elsewhere. Chances are your needs have shifted, and most of these contracts require updating. You may also need to update your address or beneficiaries. If you’re left with two cars and now need only one, you’ll potentially be returning a vehicle. If you can’t work as much (or need to work more), the scope of your employment contract might need to change, too.

Read through these documents carefully to understand your financial obligations and eliminate any surprises.

With these to-dos ticked off your list, you can begin the process of building a financial plan for your future. Use your financial adviser to do this important financial planning work with you. Planning ahead also offers healing to your heart and soul because it tilts your vision forward, allowing you to see what’s ahead rather than what’s been left behind. 

Becoming suddenly single is considered one of life’s most impactful events, so go easy on yourself as you work through this checklist. It’s not going to be helpful to beat yourself up for not knowing something about your investments or debt situation. You know now and can plan.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star