Could you go it alone? Making sure a man is not your financial plan

Money and Life
(Financial Planning Association of Australia)

Divorce is the leading cause of financial hardship for women¹. So it’s important to take control of your money and plan for a time when you may become financially independent.

Spending priorities

According to a 2014 survey of over 2,000 women conducted by RMIT, 59% have experienced financial hardship as a result of divorce² and 80% chose providing for their family as a top financial priority. Only 50% considered a comfortable retirement an important financial goal³. So, these issues are compounding the deeper, systemic issue of a gap in women’s earnings and retirement savings that’s cumulatively forcing some women into severe poverty in their senior years.

2016 Financial Planning Week Ambassador Jane Caro recently stated that women over 55 are the fastest growing demographic among homeless people in Australia⁴. This is a really alarming indicator of the financial hardship older women are facing. It’s also a signal for women of any age to take charge of their financial wellbeing, so they can be ready for whatever the future may hold.

The super gap – how much is it?

We know women are still earning less across the board than men. And they’re also most likely to be the ones taking time out from their career to care for children and other family members. These are two of the reasons why women can expect to retire with around half the super balance compared with men. Figures from the Association of Superannuation Funds of Australia (AFSA) show the average super balance for women at retirement is $138,150 and $292,500 for men.⁵

When you consider AFSA expects a single person in retirement to live on a budget of $24,108 a year⁶ – and that’s just for a “modest” lifestyle – a $138,150 nest egg isn’t even going to last a decade. And that budget doesn’t include rent or mortgage repayments. So if you don’t own your home outright, it’s going to be even harder to make ends meet in retirement.

The fallout from divorce

Losing out on owning a home can be one of the many financial consequences of a divorce. After you and your ex have split your assets, you may not have enough left over to buy property in the suburb you call home. Or you may scrape enough for a deposit, but you’re starting all over again with a 25 or 30-year mortgage to repay.

This is just one of the financial setbacks women can expect to experience when their marriage breaks up. In their recentDivorce: For Richer, For Poorer report, AMP and the National Centre for Social and Economic Modelling (NATSEM) found the average divorced women has assets valued at 90% less than her married counterpart and can expect to be earning 10% less as well.⁷

Taking control

If you’re currently single, or think of your relationship as rock solid, it’s still really important to plan for your financial future as an independent woman. Happily married, or single, women can face financial hardship because of illness or bereavement too. And there’s plenty of help available to get you up to speed on important money matters including debt, insurance, investment and superannuation.

In May 2015, ASIC launched a new Women’s Money Toolkit to guide women through important financial decisions and support them towards better outcomes for their financial wellbeing. It deals with all kinds of topics from having kids to managing finances in a relationship and you can tailor the content to suit your life stage and circumstances.

If you’re a woman living in a regional area of Australia you may have already come across the Regional Women’s Financial Literacy Project.

Seeking financial advice from someone who really understands how to support you to make the most of your money, even when you’re not earning much, can make an important difference to your financial stability and wellbeing.

Whether you’re getting married or divorced, starting a family or retiring, a CERTIFIED FINANCIAL PLANNER® professional can offer valuable advice on preparing for a secure financial future.Find a local CFP professional today using Match My Planner.

For more tips and tricks on how to manage your money, avoid mistakes that can derail your financial future, and secure your financial freedom, download our free eBook.

Sources

¹RMIT Survey Women and Money across the generations, 2014, page 23 http://www.financialliteracy.gov.au/media/558801/women-and-money-across-the-generations.pdf

² RMIT Survey Women and Money across the generations, 2014, page 23 http://www.financialliteracy.gov.au/media/558801/women-and-money-across-the-generations.pdf

³ RMIT Survey Women and Money across the generations, 2014, page 16 http://www.financialliteracy.gov.au/media/558801/women-and-money-across-the-generations.pdf

⁴Sydney Morning Herald, “Getting sound financial advice is crucial for us all, but especially for women” Jane Caro, 22 August 2016, http://www.smh.com.au/lifestyle/news-and-views/opinion/getting-sound-financial-advice-is-crucial-for-us-all-but-especially-for-women-20160821-gqxwug.html

⁵ASFA Research and Resource Centre, Superannuation Account Balances by Age and Gender, December 2015, page 3, https://www.superannuation.asn.au/ArticleDocuments/359/ASFA_Super-account-balances_Dec2015.pdf.aspx

⁶AFSA Retirement Standard, December Quarter 2016 https://www.superannuation.asn.au/resources/retirement-standard

⁷Sydney Morning Herald, Women with children biggest financial losers of divorce: report, Daisy Dumas, 13 December 2016, http://www.smh.com.au/lifestyle/news-and-views/news-features/women-with-children-biggest-financial-losers-of-divorce-report-20161212-gt92op.html

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.