Highlights in this issue:

*** Divorce is nasty enough: Don’t let it ruin your finances too…
*** The #1 separation scam you need to be aware of…
*** 4 ways to find your financial footing once your divorce is final… and more…

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From the pen of Karin Iten

Dear Investment Academy Reader,

“No one gets married expecting to get divorced anymore than they go to Egypt expecting to see the pyramids crumble into the sand. Nevertheless, the pyramids are eroding and divorce rates have been increasingly steadily,” says prominent financial journalist Andrew Beattie. And he’s right…

Divorce has gone through the roof. According to StatsSA, most marriages last an average of 15 years… but only if they last the first 12 months when divorce rates are at their peak.

As unromantic as it sounds, you must be prepared. Rather safe, than sorry. That’s why, this week, we’re looking at how divorce affects your financial situation and how you can make this process easier on your pocket.

Tip #1: Know what you have
Right from the get go, it’s important to know what you and your spouse own. Concealing assets (like property or investments) is one of the most common – and devious – things partners do to each other.

How do you avoid this?

Well, the best thing to do is collate all the documents in your house into one file for transparency. Then, keep valuations in the file so you know exactly what every item is worth. Get each item in the file valued annually. (This step is also hugely helpful with keeping your insurance policy up to date.)

Should you find your marriage teetering on the brink, start photocopying every financial statement in there – including tax returns, bank statements, insurance policies, till slips for appliances, etc. And the best thing is, doing this won’t only help in the event of a divorce, it’ll also mean your documents are all together should either you or your partner pass away. (This is especially important if you or your partner don’t work or only work part-time.)

Tip #2: Make lists
Remember, prolonged litigation isn’t easy on you, or your pocket. Often, couples who engage in long, drawn out court battles find that the objects under contention are worth much less than the emotional and financial strain it puts them under. To get around this, make a list of everything you’d like to keep. Then compare lists with your soon-to-be ex-spouse.

If any item appears on both lists, come to an agreement about who gets what. If you aren’t able to agree on what to do with all the items that appear on both lists, then you’ll probably be better off (financially and emotionally) selling them and splitting the cash equally between you. Remember, it’s important to have a divorce mediator sit in on these discussions so you have legal recourse if the other party doesn’t stick to the agreement.

Tip #3: It all comes down to making a change
The sad fact of the matter is, once the terms of your divorce are settled, you’ll be poorer than you were. But there is an upside: You’ll know exactly where you stand financially and what you need to do to get back on track.

Here are a few things to consider:

*** Cancel joint accounts and joint credit cards.
*** Change the terms of your life insurance, will and any other policies you may own.
*** Downsize – this is the best survival method out there. Remember, since you’re no longer dependent on anyone to help you with your money issues, you’ll need to change your lifestyle to stay afloat.
*** Check your credit limit and your credit rating. Now that you’re on your own, you may not be able to maintain (and pay off) the level of credit your previously could. As such, should you default on any payments, your credit rating will be affected – so speak to your bank about amending this to a more reasonable amount.

Here’s to your financial freedom,

Karin Iten
For the Investment Academy

* This article was adapted from MoneyWeek feature.