‘My future starts now!’ - the first steps of your financial post-divorce future

When the dust is settling following your divorce, it’s likely you will start thinking about everything you need to do, especially when it comes to your finances.

As you begin moving forward with life, you may need to reassess your priorities and think about what’s most important. You may already have engaged a financial adviser during the divorce process who can also help with a mortgage for a new property, inheritance tax implications, and estate planning, among other things.

However, once you have a clear idea of your new financial position, the task of addressing what to do with your assets, particularly if you have received a lump sum or financial settlement, is the next step of the process, and investing it might be an avenue to consider.

If investing is new to you, employing the services of a professional will help guide you through the process and as together you will discuss your options, appetite for risk and financial goals. The plan you and your investment manager will formulate will be totally tailored to you, your priorities, your plans for later life, and how you want to spend your money.

Why invest?

While past performance is no indication of what might happen in the future, investing over the long term should produce a better return than placing a lump sum in a bank or even savings account.

Although savings accounts are low risk, they typically return very little, especially with current interest rates at rock bottom. Also, over time the impact of rising inflation may eat into the value of the buying power of these funds.

This is why an investment strategy can often play a pivotal role in a person’s financial plan. If capital is allocated the right way, investing can grow a person’s capital over the long-term and beat inflation.

There are no guarantees in investing, but a sensible and tailored investment strategy can help meet financial goals while also ensuring greater financial security for the future.

Looking to the future

Traditionally, control of a household’s finances has been taken on by men. However, there are signs this is changing. Family structures are changing, as are how couples cohabit and approach finance, with women now becoming more involved (evidenced by the growing number of female investors in recent years).

This is part of a greater long-term trend of women taking on greater financial control across society.

Generationally, a greater number of women are set to inherit significant wealth. In a 2020 survey of 10,000 affluent investors, including 3,000 female financial decision-makers, McKinsey found while two-thirds of baby-boomer assets are currently owned by joint households, roughly $11trn in assets is likely to be passed to women outliving their male partners.

At the same time, divorce is becoming a greater disruptive force. Family dynamics and society are changing. This means the stigma linked to divorce is receding, with women being encouraged to take greater control of their finances and become more involved in investments.

Gender roles are changing, and finance is a big part of this. Divorce can be an emotionally testing time for many families. But with the right advice and guidance, this can be a positive financial reset for women – especially if they have not historically been encouraged to engage in financial decisions that can impact them.

There is no one-size-fits-all approach to investing and your investment manager will tailor your plan to fit your needs. This plan will be based on your financial priorities, how much money you have to invest, and how much risk you’re prepared to take.

At Quilter Cheviot, we recommend taking the time to work out your immediate financial priorities and your long-term goals prior to an investment manager formulating a plan and implementing that plan into your portfolios.

This will help you to be as prepared and empowered to take on the challenge as possible.