Those that find themselves starting over in life can face surprisingly difficult financial challenges. Here we investigate five common interruptions that many will have to face throughout their lives.
Relationship breakdown
The breakdown of a relationship can have an extremely damaging effect on a person’s financial state. The issue is greatest for women with dependent children who, the Australian Institute of Family Studies (AIFS) states, even six years after a divorce find it difficult to recover their pre-divorce income1. The same report said the negative effect of divorce on assets and income can last into older age. Re-partnering can offset the financial effects, but those that remain single often find themselves reliant on Government income support systems, according to AIFS. There is a significant economic advantage associated with living with another person and when this comes to an end, costs increase. Financial planning is vital, as is a thorough understanding of one’s legal rights and responsibilities.
Illness
With obesity overtaking smoking as the leading cause of premature death in Australia2 , mental illness affecting one in five adults3 and the number of annual cancer diagnoses more than doubling between 1982 and 20104 , the likelihood of one’s career being interrupted by illness is very real. The insurance industry has developed products to help look after a person’s financial responsibilities during such an illness, but returning to work after a medical battle can be testing all the same. Research by Macmillan Cancer Support has revealed that some employers fear the expense5 of changes that may be required when a person returns from illness. At the same time, returning to work is not only important financially for the individual, but also signals a return to normality. One of the secrets to success, they say, is constant and open communication between the individual and the organisation during the absence, and a gradual transition back to work afterwards.
Redundancy
Being made redundant or let go, especially when the event is unexpected, is a blow both financially and in terms of confidence. If it should happen, the worst thing you can do is mope about the house. Develop a plan that begins with finding out what support you could be offered. Are there any Centrelink benefits you might qualify for? Could your mortgage repayments be covered by insurance? Can your insurance providers waive costs for the period you’re unemployed, or suspend a policy such as Income Protection? Is your ex-employer providing you with all of the redundancy benefits they should be? Are they offering assistance in finding a new role at another organisation? Then move on to applying for new roles, including contacting recruiting agencies. A gap in your CV becomes more difficult to explain the longer it lasts.
Back to work after children
Coming back into the workforce after a period in which childcare has been your main role can be difficult emotionally (leaving the children), technically (do you still have the knowledge?) and socially (getting to know a new group of people). Experts say it is a good idea to conduct a career evaluation that looks backward and highlights your specialist knowledge, talents and achievements, then looks forward and selects certain roles in which you would shine. This way you are basing your decision on solid fact, which will boost confidence levels. Don’t be afraid to turn down jobs you don’t think you’ll enjoy, and never accept a position just for the money. And don’t forget to include in your CV all of the voluntary work you have conducted at your child’s school, or the pro-bono marketing consulting you did for a friend who was launching a new business etc. Finally, network both online and offline. Positions are filled by people that know people, so make sure you’re top of mind.
Mortgage difficulties
If a household’s income at any stage is unexpectedly lowered, this can lead to mortgage stress. Once a person is facing serious financial hardship as a result of a reasonable and unforeseen issue such as illness or job loss, lenders are obliged to make certain hardship provisions available in order to allow the person an opportunity to find a way out of their situation. Start by speaking with your financial adviser or a not-for-profit financial counsellor, who will help you to figure out exactly where you are financially, whether you might be able to increase your income and what assets you may be able to sell. Importantly, they will also put deadlines in place so a solution doesn’t take so long that the problem compounds.
Tips to stay on track
- Always set deadlines for each goal you set. Without deadlines, many plans never come to fruition
- Break down your plans into achievable pieces and put each onto a timeline, so you can track your progress
- Develop a very clear picture of your finances including debt, income, savings, super and other incomings and outgoings
- Be creative about increasing your income. If there is an adult child living with you, perhaps it is time for them to help cover their costs
- Seek advice on benefits that may be available to you as you re-build
1 ‘The financial impact of divorce’, The Australian Institute of Family Studies (AFIS), 24 July 2012.
2 ‘Facts and figures: Obesity in Australia’, Monash Obesity and Diabetes Institute, Monash University.
3 ‘Facts and figures about mental illness’, SANE Australia, 2014.
4 ‘All cancers in Australia’, Cancer Australia statistics.
5 ‘Returning to work after an illness: What support do employees need?’, The Guardian, 30 May 2013.