In the third part of our Special Report on Money and Divorce, Hann Liew, the CEO of RinggitPlus, shares his thoughts on managing money wisely when you’re newly single, perhaps with children to support.
Q: What do women need to do, finance-wise, after a divorce? What should they look out for?
A: Divorce can be financially devastating. Whenever divorce is inevitable, you should start discussing money management immediately, before papers are filed.
Every divorce is unique and specific advice can only come from experts who are familiar with your case. However, there are some general tips that can guide you through the process.
1. Track your current expenses, adjust, and anticipate future ones
Tracking your expenses should be a habit that we all practise, no matter your marital status.
If you’ve not been doing so, start as soon as the decision (to get a divorce) has been made. This doesn’t just help you to build a budget post-divorce, but it’s also important for your attorney and the judge in deciding how to split assets and debts, and whether to award spousal or child support. It’s even better if you’ve been tracking your income and expenses. You have a record of past months or even years to build your case.
Expenses that you should be tracking include:
- Utilities and home maintenance, including rent or mortgage payments and phone & internet services
- Transportation, including car loan, car insurance, service and maintenance
- Child care
- Anything else that you spend money on
2. Protect your child
When you’re getting a divorce, finances are often looked at until your child’s 18th birthday. Make sure you include in the settlement an agreement on saving and/or paying for your child’s education.
Also ensure both you and your ex-husband have sufficient life and disability insurance so that your children are protected, no matter what happens. See point #3 for more information.
Not just that, it’s important to make sure your child has a health insurance too. Currently, there are several options available in the market.
3. Look into health and life insurance
Remember to plan for this in your tracker or budget. If you do not have a health and life insurance policy, this may be the time for you to get one. If you’re unsure of which policy you should choose, there are online resources, such as RinggitPlus.com, that allow you to search, compare and apply for the plan that suits you the most.
If you already have health and life insurance, maybe this is the time for you to review your policy and re-examine your policy’s beneficiaries. Make sure you remove your ex-husband as your beneficiary, should you decide that you would rather have him removed. Otherwise, he will receive the settlement in the event of your death.
4. Plan for the long-term and retirement
Now that you do not have someone to share all the expenses with, it’s even more crucial for you to do long-term financial and retirement planning.
Review all the investment plans and retirement deposits, and make adjustments accordingly, if need be. While it’s important to prioritize immediate needs, you should not abruptly cancel your deposits or withdraw money from the accounts.
If you do not have a investment or retirement plan, it’s good to consider getting one, as soon as you can and no matter how small the amount.
Below is a scenario-based example:
Mandy just got a divorce recently, at the age of 29 years old. She has full custody of her two children, who are 4 years old and 2 years old. Mandy and her children live with her parents now. Her parents take care of her children when she works. Her ex-husband does not pay alimony on time every month.
Summary of her expenses:
- Monthly income: RM3,500 gross (RM3,090 nett)
- Savings in account: RM1,200
- Total monthly expenses: RM2,950
- Car loan repayment: RM400
- Other car and travelling costs (petrol, parking, tolls, etc.): RM300
- Phone and Data Plan: RM200
- Utilities: RM250
- Insurance: None
- Children’s books, diapers, kindergarten fees, etc: RM1,000
- Food and household food contribution: RM800
- Savings RM140
While it looks like Mandy can still manage to save despite being a single earner now, by systematically going down the list of where her money mostly goes out, she can ask herself some questions and make tweaks to improve her situation. For eg:
- Is she efficient with her car/travelling costs and her food expenses? For example, by using a petrol, groceries and/or dining cashback credit card (or two), she could be getting up to 8% back on her petrol expenses as well as food. 8% back off RM1,100 (ie petrol/dining/groceries) is RM88 extra to her savings kitty every month, without lifting a finger!
- Is the internet or mobile data too much for her? RM200 monthly probably means she’s on an older contract when data was a little more expensive. With many ‘unlimited calls and data’ plans available in 2019/2020 for around RM50, a month, that’s RM150 or so back in her pocket without changing her life too much.
- As a single mother, not having insurance (particularly life and medical) is not advisable, as any loss of ability to earn income through misfortune is a larger risk without a partner to bear the burden.