Separation or divorce is one of the biggest changes you can experience. It’s emotionally tough, and managing your finances can feel overwhelming. However, by following a simple plan, you can make things easier for yourself. Financial expert Lesley-Anne Scorgie advises going easy on yourself and taking things step by step.
Here’s a guide to help you navigate your finances during separation or divorce:
1. Gather Your Financial Documents
First, collect all your important financial papers. This includes:
- Bank Account Statements (for both joint and individual accounts)
- Tax Returns (from the past 3-5 years)
- Mortgage and Loan Documents
- Credit Card Statements
- Investment and Retirement Accounts (RRSPs, TFSAs, Pensions)
- Insurance Policies (Health, Life, Home, Auto)
Having these documents handy will give you and your lawyer a clear picture of your financial situation.
2. Open Your Own Bank Accounts
If you have joint bank accounts with your spouse, it’s time to open new accounts in your name alone. This includes both a chequing and a savings account. Once your accounts are set up, switch your paycheque and any automatic deposits to your new account.
You may also want to transfer half of the funds from any joint accounts to your new account, but make sure to leave enough to cover shared bills, like rent or mortgage payments. Always communicate with your spouse and seek legal advice when doing this.
3. Track Your Expenses
Divorce or separation often leads to changes in your financial situation. You may go from two incomes to one, or you might face new costs, such as child support or spousal support. Tracking your expenses will help you manage your budget and plan for the future.
List your monthly expenses, such as:
- Rent or mortgage payments
- Groceries
- Transportation (car payments, gas, transit)
- Childcare
- Utilities
This will help you understand your new financial reality and how much you need to cover your day-to-day living expenses.
4. Check Your Credit Score
Your credit score is a key part of your financial health. It affects your ability to get a loan, rent an apartment, or apply for a credit card. If your credit history is tied to your spouse, it’s important to check your own score. You can do this through Equifax or TransUnion, the two main credit bureaus in Canada.
If your credit score is low, you can improve it by paying off debts, paying bills on time, and avoiding new debt when possible.
5. Understand Spousal and Child Support Rules in Canada
If you have children, you may need to deal with child support. Child support payments in Canada are based on both parents’ income and the number of children. If one partner earns more, spousal support may also be required.
Each province has its own guidelines for support payments, so it’s important to consult with a lawyer to understand what applies to your situation.
6. Update Your Will and Beneficiaries
Divorce or separation means you’ll need to update your will and the beneficiaries on your accounts. This includes life insurance policies, RRSPs, TFSAs, and pensions. Without updating these, your ex-spouse could still be entitled to your assets, even if that’s not your intention.
7. Get Legal and Financial Help
Dividing assets and debts during a divorce can be complicated. Working with a family lawyer is essential to understanding your rights and responsibilities. You’ll also want to consult a financial advisor who can help you protect your financial future and adjust to your new circumstances.
In Canada, assets are divided through equalization, which means shared property and debts are split between you and your spouse. This process includes the matrimonial home, where both parties have equal rights, regardless of whose name is on the title.
8. Build an Emergency Fund
Separation or divorce can come with unexpected expenses, such as legal fees or moving costs. Start building an emergency fund by saving 3-6 months’ worth of living expenses. This will give you a safety net in case things don’t go as planned.
9. Reevaluate Your Financial Goals
After you’ve gone through the initial stages of divorce, take time to look at your financial goals. This may include:
- Adjusting your retirement plan
- Setting up a savings plan for your children’s education
- Considering lifestyle changes, such as downsizing your home
Planning for your future will help you feel more in control and secure as you move forward.
Your Strategic Ally – Muia Consulting
Going through a separation or divorce is overwhelming, but you don’t have to do it alone. Muia Consulting can guide you through the financial complexities of this process. We offer expert advice on everything from dividing assets to setting up a new budget, so you can confidently face the future.
Our team specializes in:
- Reviewing and organizing your financial documents
- Providing strategic advice on budgeting, debt management, and retirement planning
- Helping you understand your options for spousal and child support
- Working with your legal team to ensure a fair financial settlement
Contact Muia Consulting today for a personalized financial plan that will help you move forward with confidence. We’re here to make sure your financial future is secure, even during life’s most challenging transitions.
