I’m newly single. How can I improve my finances?

When your relationship ends, you may want to improve your finances and take some of these steps to feel more confident in your financial health.

Woman leaning up against a wall

Separation and divorce can be overwhelming and confusing. While we may have had family or friends who have gone through a breakup, we don’t really know the rules of engagement or impact on our finances when faced with the prospect of our own separation or divorce.

Divorce is new to virtually everyone who goes through it for the first time. Nobody knows the process, and really, nobody knows how each individual agreement is going to work out until the very end.

You no doubt have some worries of your own, but there are concrete actions you can make on your own behalf today. These steps will put you in a better position down the road when the dust settles, as you set out to build the next stage of your life.

1. Ask for advice

First and foremost, speak with your legal counsel to get the right advice for you. This step is key. A family lawyer who has seen many cases and knows the law will help you dot your i’s, cross your t’s and have some closure when the time comes so you can move on with confidence.

In the meantime, talk to friends and others who’ve been through a separation or divorce. Everybody’s scenario will be different, so it will help to hear first-hand advice from a few people about the basics and about how to separate emotions when engaged in financial negotiations.

2. Run the numbers

Get out your calculator before you enter into a separation agreement. Consider your ongoing cash flow needs, taking into consideration the fact that household expenses will likely now be borne by your cash flow alone.

In addition to considering how much of a down payment you may require, think about what kind of mortgage payment you would be comfortable paying given your current circumstances. If you’re just getting started, check out online mortgage calculators to get a sense of your budget range. Then connect with a Wyth mortgage specialist to understand how much you could be approved for based on your new income and the size of your down payment.

You will likely find that your new cash flow situation is quite different than what you’ve been accustomed to in the past. For this reason, ask questions if you have them, don’t make assumptions and allow a buffer for the unknowns.

3. Get your house in order

Remember that you may eventually need funds for a new place to live. When negotiating your separation agreement, consider whether you’ll have enough equity for a proper down payment in the future. You may also choose to rent a home in the future instead of purchasing one, so think about the payments that would be necessary in that instance. Some assets are more liquid than others, so consider how quickly you may need access to cash.

If you’re planning on keeping your home, can you afford to live there on your own? Do you need to refinance? Can you supplement your income by renting out part of the house?

Owning a home may also be part of your longer-term savings plans. When negotiating your separation agreement, if you agree to pay a lump sum for future bills such as university for the kids, consider that this could impact the amount you will have for the down payment you need to secure a mortgage.

4. Give yourself some credit

Some people may not have credit in their name, and when they split from their partner, they’re left at square one. Make sure you have a credit rating showing a history of responsible borrowing and payments, and start to develop one if you don’t. Also keep a close eye on this credit rating. Try to make it as robust as possible and keep it that way—it will be a key part of getting loans in the future.

5. Review and get comfortable with the way things are set up today

Review anything that is still held jointly—both your assets and your liabilities—and ensure you’re comfortable with the limits available, the balances and the access that both of you have to those accounts.

When reviewing the details, some couples will opt to reduce credit limits at this time, while others will keep things the same. Every marital breakup is different, and your approach should reflect your own personal scenario.

6. Open an account in your own name

A High Interest Savings Account (HISA), meanwhile, can keep your money safe and provide you with a solid rate of interest on your deposits. Deposits are eligible for CDIC protection up to $100,000, per insured category, per depositor, and provided such deposits are payable in Canada, as outlined in CDIC’s “Protecting Your Deposits”. To learn more, visit CDIC’s website.

Such accounts can be invaluable when you need speedy access to cash to make rent payments (many will rent before they buy), pay lawyers and deal with other expensive changes. Not only do you need this money to be accessible, it needs to be kept safe and should also pay you a reasonable amount of interest.

Savings can make you feel secure until you’re ready to make decisions and move forward. Getting started is something you can do right away by opening and funding a new High Interest Savings Account, which can be done online in a few minutes. 

 

7. Get your own credit card

If you don’t have a personal credit card that is only in your name, now is the time to apply for one. Once you have your own card, ensure you make payments on time. This will improve your credit rating and help you obtain future credit more easily.

8. Consider automatic savings

Regular, pre-authorized contributions to your High Interest Savings Account can be another way to continue to build your rainy-day fund. You can also set up regular savings programs, paid directly from your payroll—an easy way to “set it and forget it.”

In addition, consider asking Canada Revenue Agency to have tax returns or child benefits deposited directly to your account. These funds will immediately start earning interest while also remaining completely accessible in the event that your car breaks down or some other emergency transpires.

9. Make life choices for yourself

Don’t be too generous, even if you’re on good terms with your former partner. Run the numbers and understand your cash flow. Negotiate where necessary to ensure you’ll be covered as best as possible for everything you’ll need in life on your own going forward.

Add a buffer for unknowns and remember that nothing for a single person is as efficient as it is for those who are in a partnership. Your fallback plans will also be different than they were before. Make wise choices today to help your future self.

How Wyth can help

High Interest Savings Accounts (HISA) give you control over your funds along with a competitive rate. In addition, your savings are protected by $100,000 worth of deposit insurance from the Canadian Deposit Insurance Corporation (CIDC).

Get mortgage advice from a Wyth mortgage specialist who can determine what you can afford and how much you’ll need for a down payment on a place to live.

Our subsidiary, Wyth Trust, can provide further assistance for those with a high net worth or complex estate needs.