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Plan to get back on your feet after a breakup

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NEW START: Starting again after a relationship split can be financially devastating.

In hindsight, she didn't need a brand new people mover. It was bought "just before her friggin' marriage ended" and ate more than half her savings.

Michelle Buchanan, a spiritual counsellor who believes in the mystical power of numbers, didn't see the split coming. "His money paid the rent, all the utilities and everything. My money would pay if the kids needed something from Pumpkin Patch or we were going to go to a movie."

Now she was the financial head of a household and the bills were flowing. Luckily, at 40, there was still time to reinvent herself.

SPLITSVILLE

Splits - like redundancies, childbirth and new jobs - make us think more intensely about money, says David Kneebone, executive director of the Commission for Financial Literacy and Retirement Income.

Often we regret past financial decisions. Sometimes we regret entire careers. Traditionally women were more likely to suffer monetarily: They take more time off to rear kids; they earn less, die later and retire younger. They have less income to save for longer retirements. A couple's best retirement savings asset is often an income, and it walks away with the higher earner.

The most obvious solution for the one left behind is to find the highest-possible paying job and save like crazy, says Kneebone. "Unfortunately, a lot of couples break up in the decade from 50 to 60." At 58, the options for reviving a career are limited.

SENSE OF URGENCY

Breaking up was galvanising for Buchanan. There was no point selling the car, but she nixed the impulse shopping, reviewed her phone contract and took her son out of an after-school programme.

"My whole motherly instinct went into overdrive and all that mattered was that I had to provide for these children." That was four years ago. Her son was five and her daughter 18 months old.

She hunted new clients, stepped up advertising for her business and last month secured a book deal. Her advice to others is to maintain their own safety net. "You never know what is just around the corner."

LIST IT

In an ideal world, couples would plan for the eventuality of a split at the height of loved-upness. Mutual accommodation and fairness flow far more freely when you really like someone.

Sadly, starting a conversation about parting is less romantic than hand-washing socks. At least washing socks together suggests a shared future, says Kneebone.

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"It's an unpleasant conversation for many people." You should probably do it anyway, he says. There are worse things that can happen than besmirching a lovefest - like trying to divvy up money in the throes of a breakup.

Writing things down is an excellent idea. "You need a clear and possibly documented understanding of what the situation will be," says Kneebone. "Regardless of who does what in the relationship, you need to make sure you're both catered for and that you're considering how you could operate as a couple later in life or as two individuals."

Money writers at the website US News suggest making a list: Who would stay in the house? Who would get the cats? The car? The debts? "Don't forget to bring up your long-term goals, too, which can make the discussion a little more romantic . . . Do you want to swim with dolphins in the Bahamas?"

THE LAW

The law won't necessarily compensate a partner who makes career sacrifices. The legal starting point after a relationship ends is that shared assets - which can include KiwiSaver - are usually split 50/50. Low-income earners can claim compensation in court if they have clipped their careers to help a partner.

But a preliminary study of court cases for the commission found exes who earned less after years at home were rarely given more than half shared assets. Trusts and other separate property such as family farms often stayed with the higher earner, usually the man.

That was what the law intended, they found. But it means couples need to agree beforehand if one partner is going to compensate the other, for example by giving them 70 per cent of the shared KiwiSaver. If a mutual arrangement is too hard to tackle, at least have a plan for yourself, says Kneebone.

ALL THE SINGLE LADIES

NZ Super, as it is currently paid, is enough so retirees know they won't starve. Any sliver of luxury requires personal savings, which is where relative earning power comes in.

Figures from KiwiSaver provider Westpac show women tend to have lower KiwiSaver balances than men.

The commission is gathering evidence on the gender savings gap and may make recommendations to the Government in September. Women probably should not expect a white knight. The Government followed none of the commission's previous set of retirement recommendations.

And the underlying causes - lower pay, greater childcare - have been around forever. Kneebone says the rise of stay-at- home Dads is extending the problem to men.

"It's certainly not uncommon now to see a woman as the primary earner and a stay-at- home dad."

One way to even things up a little is for the working partner to keep up retirement savings for the stay-at-home parent. In Australia, actuaries Rice Warner are lobbying the Government to top up the super funds of women on maternity leave.

Deputy chief executive Melissa Fuller has gone further and applied to the Australian human rights watchdog for permission to pay more Super to women, because they live longer, shoulder more child care, and other factors.

Fuller says she is "quietly confident". She suggests women consider working longer to shrink their retirements.

"Otherwise you're drawing down earlier on your savings and they need to last longer," Fuller says.

AFTER THE FACT

If you've already split, none of this is much use. For you, Kneebone has even more brutal advice. One, see a lawyer - a free one from a community law centre if necessary. Two, open an individual bank account, credit your earnings to it, and make sure your partner does not know your PINs.

"You may need to freeze or close every store card, account, loan, or debt you've set up jointly," says Sorted.org.nz.

There's more from Kneebone: "You still need to make sure the bills get paid and APs don't bounce. You might need to update the rental agreement so only your name is on the lease, or you could be liable for unpaid rent or property damage caused by your partner."

And: "Consider redoing your insurance, updating your will, or if you have a trust you need to remain part of or exit. Think about assets and debt you have with your partner and whose name they should be in."

The next step is to cut the ex out of the photo album, financially speaking: "Make a plan for the future with goals for just you and your children."

This is not healing balm for a hurting relationship. More a quick and painful yank of the plaster.

"Those steps are quite confronting and they do tend to signal the end of a relationship. But letting things drift for a period of months or years can become very troublesome."

RECOVERY

Four years on, Buchanan isn't yet saving for retirement.

She might be able to when the cheques start coming from her US- based publishing deal. She is gradually relinquishing the last of the taxpayer help she gets from Work and Income.

"I won't need it soon - that's a short term goal." The car's number plate bears the logo of her spiritual advisory business.

"I'm still living day to day and having to watch everything, but it is getting better," she says.

- © Fairfax NZ News

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