When you find yourself on your own

When I found myself on my own after 20 years of marriage my immediate feeling toward my finances was complete and absolute panic - would I be ok?

I have worked in financial planning for over 20 years. I have a good income and a better than average understanding of finances. However, like many household chores, the day-to-day responsibility of “taking care of bills” was left with my very capable husband. We had no financial concerns as a duo, but was I going to be able to afford to run a household on my own, let alone have financial security in the future? Instinctively I knew I would be. But that fear was overwhelming and much like a scary movie, if I covered my eyes to it all, what I was imagining would be far worse. For me, understanding my money was an important part of feeling in control.

I took to the task of understanding my cash flow. Documenting my income and expenses. I’m not a budgeter. I’ve found that budgeting is a bit like a diet plan… great on paper but hard to stick to. I’m a reverse-budgeter. I have a clear understanding of what my fixed commitments are, what I need to save and the rest I can spend at my own pleasure.

The first step is documenting your fixed expenses - the bills you can’t avoid like utilities, loan repayments and insurance. In the short term there is usually very little we can do to drastically increase income however we can review expenses. It’s important to make sure at this first step that your income is greater than your fixed expenses. Otherwise you will fall into a never ending debt cycle and financial stress - the kind that keeps you up at night.

As individuals we have a tendency to overstate our income and understate our expenses. When you’ve calculated your annual fixed expenses, add a buffer and divide this by your pay cycle. Direct this money to a “bills” account each pay cycle. Aside from having the money to meet your fixed expenses, it will be a good gauge of whether your expenses are true to your estimates.

This account should be separate to your day-to-day spending account (groceries, petrol, eating out, personal care). Having separate accounts for bills and everyday spending is important to ensuring you don’t overspend.

The remaining income should then be allocated between saving and day-to-day spending.

I like to set up savings goals. Set aside a fortnightly amount for holidays, long term savings and superannuation. 20 years of financial planning has taught me that achieving your goals is better done with smaller, disciplined saving over a longer period of time. Committing to regular savings - no matter how small - becomes routine and you become used to not including that money in your general spending.

Taking stock of your assets and liabilities is an important benchmark. Using a dieting analolgy again (sorry) it’s a bit like tracking your weight. At the beginning of each month I take note of each of these in a spreadsheet that allows me to compare my progress each month and each year. Month to month you can see patterns in your spending, year to year you can see patterns in your saving. It’s a monthly ritual to make sure you are on track and give yourself a pat on the back.

But what happens if you are not able to meet your expenses or savings goals? Then you need to sit down with a financial adviser to review your options. Seeking professional advice will give you a clear path and peace of mind.

There is an incredible sense of empowerment you feel when you are in control of your finances. The benefits of financial health and wellbeing are well documented. More often, the lack of wellbeing in women due to low financial confidence. Understanding and taking control of your money will change your life.