While divorce can upend every facet of one’s life, it’s usually the financial consequences that are the most daunting. Rebuilding your financial life after your marriage has broken down may feel overwhelming – especially if you were not the primary money manager in the relationship. If you’re navigating the uncertain territory of your post-divorce finances, here is some practical advice to help you gain control.
1. Regain financial control
Make it your top priority to take full ownership of your financial affairs. If you held joint accounts with your ex-spouse, begin the process of opening new accounts in your name, and make sure that all income, debit orders and savings contributions are moved accordingly. It’s also a good idea to consolidate accounts and simplify your financial structure to create a streamlined and manageable system.
Did you know? Divorce is one of the top five most stressful life events, alongside the death of a loved one and job loss.
2. Create a transitional budget
Transitioning from a dual- to a single-income household can be one of the most challenging aspects of divorce. Ideally, prepare a flexible transitional budget that accounts for your anticipated monthly expenses with room for adjustments as and when new expenses arise. Track your spending closely during this period and consider working with an independent financial advisor to assess the long-term implications of your financial decisions.
Did you know? More than 50% of divorced South Africans say they underestimated the cost of living on their own after separation.
3. Delay major expenditure
Delay any major expenditure until the division of assets is complete, your financial position becomes clearer, and emotions have settled. Bear in mind that the sale or transfer of assets may have capital gains tax or other tax implications, so don’t commit to spending a lump sum before fully understanding the tax consequences. If you’re due to receive a monetary payout as part of your divorce settlement, seek professional advice before investing the funds.
Did you know? Withdrawals from investment policies in South Africa may trigger capital gains tax—even if the funds were part of a divorce settlement.
4. Revisit your life cover
If you had life cover in place as part of your joint financial plan, it’s crucial to revisit both the terms of the policy and your nominated beneficiaries. Importantly, if you have minor children, avoid nominating them directly as beneficiaries on your policy – instead, set up a testamentary trust in terms of your Will, ensuring that the benefits are managed on behalf of their appointed trustees. If your ex-spouse has maintenance obligations, ensure that these are provided for through appropriate life insurance.
Did you know? In South Africa, if a minor child is nominated directly, life insurance proceeds may be paid into the Guardian’s Fund for administration.
5. Review your short-term insurance
Once you’ve settled into your own home, be sure to review your short-term insurance requirements – bearing in mind that with fewer assets, your premiums may be lower. Use the opportunity to create a detailed inventory of your belongings and obtain some comparative short-term insurance options that are suitable for your new circumstances.
Did you know? Many insurers offer lower premiums to clients who install household security systems—something to consider in your new home.
6. Manage and eliminate debt
If legal and professional fees have left you indebted post-divorce, be sure to establish a debt repayment plan and prioritise maintaining a healthy credit record. If you haven’t previously had credit in your own name, consider opening a small credit card account and managing it responsibly to build up your credit score.
Did you know? A strong credit score can influence more than just loans—it may affect your ability to rent property or secure employment in South Africa.
7. Build an emergency fund
Without a second income to rely on, an emergency cash reserve becomes essential – especially if you’re dependent on your ex-spouse for maintenance payments. An emergency fund can create a protection against late maintenance payments, retrenchment or illness, so be sure to set money aside as a cash buffer.
Did you know? According to Standard Bank, only 29% of emergency high-income earners have access to emergency savings.
8. Secure income protection
As the sole income earner, your ability to generate an income is your most valuable asset. Income protection cover can replace your earnings if illness or injury prevents you from working. Choose a policy with appropriate waiting periods and ensure it includes cover for temporary disability, which is statistically more likely than permanent disability. Severe illness cover is also advisable, especially without a spouse to provide financial or physical support during recovery.
Did you know? In South Africa, you’re up to five times more likely to suffer from a temporary disability than a permanent one.
9. Update your estate plan
It’s imperative to update your estate planning once you’re divorced, starting with your Will. Remember, you have only three months after finalising a divorce to update your Will; failing which, any provision made in your Will for your ex-spouse will remain binding.
Did you know? Your ex-spouse may benefit from your will if you don’t update it within 3 months of your divorce.
10. Review retirement fund nominations
While you may wish to remove your ex-spouse as a nominated beneficiary on your policies, keep in mind that retirement fund benefits are distributed in accordance with Section 37C of the Pension Funds Act. This means that, even if your ex-spouse is no longer nominated on your retirement fund, they may be entitled to a portion of the benefit if they were financially dependent on you–wholly or in part–at the time of your death.
Did you know? Trustees have up to 12 months to identify all financial dependants and allocate benefits—even overriding your nomination form.
11. Assess the marital home realistically
Before insisting on keeping the marital home as part of the divorce settlement, be sure to understand the financial implications of doing so. Emotional attachment can cloud one’s judgement – and the reality is that ongoing maintenance costs, rates, taxes and potential re-sale issues can affect your finances adversely. Property is not a liquid asset, so ensure that retaining the home will not compromise your cash flow post-divorce.
Did you know? In South Africa, women are more likely than men to want to retain the marital home post-divorce—often at a long-term financial cost.
12. Rebuild your retirement strategy
Divorce generally disrupts one’s long-term financial plans, so it’s important to revise your retirement strategy given your new set of circumstances. In doing so, be sure to reset your goals, understand your funding investments, and make the most of your allowable tax deductions. Even if you’ve lost retirement savings through the divorce, start with a clear plan for the future and seek professional advice on building a new plan for financial security.
guidance to rebuild steadily.
Did you know? South Africans can contribute up to 27.5% of taxable income (capped at R350 000) to retirement funds and deduct it for tax purposes.
Rebuilding your financial life after divorce will likely take time, so be patient and remain focused on building financial freedom for yourself.
Have a fantastic day.
Sue
