Divorce a major blip on financial radar

DIVORCE IS a time when finances change – for the worse. There is often great bitterness leading up to divorce – and then a battle royale as the house, money, business or farm are fought over.

One of the partners (and sometimes both) will feel that they did not get their fair share or in some way they have been shortchanged.

When the separation process ends (sometimes this takes years) there are children to care for, emotional wounds to salve and a strange, new life to live.

The newly divorced take stock, and what they find is that their household wealth is halved, income is frequently lower and expenditure is usually higher – and that is before they start to look at the lawyers’ bills that have been mounting up.

Divorce is truly the worst of all financial worlds.

Some people recover from this much better than others. This may be because one partner had been preparing for divorce or it may be because some people have a better support network than others.

Then there are plenty of people who during the relationship have had little or nothing to do with the management of the family’s finances. On separation, they are paralysed by the prospect of finding a house, mortgaging, setting up and running bank accounts, looking for work and so on.

Whatever the reason, some are more resilient than others. Divorce is never going to be good, but there are those who can look back in a decade and see it as a financial blip, while there are others who look back and see it as the start of their financial destruction.

I think that there are three main things that you need to do to recover financially from divorce: first, take your time. Any major life event and financial change means planning – especially when there is a lump sum of money involved.

This planning should be done as slowly as possible, and I would suggest that any money that you have from the settlement should be put in the bank and left there for at least six months while you think through your options.

Whatever assets you have will be the financial base for the rest of your life –they need to be held carefully and not frittered away. You will have to take control of your spending: monitor what you have to make sure you are not eating into your precious capital.

No matter how bad you feel about your divorce, this is not a time to try to cheer yourself up by buying a little red sports car or taking the kids on a ski trip to California.

Second, address the housing issue. Housing is likely to be your biggest cost and it can either put you ahead financially or become a deadweight and drag on your money for years.

If you are buying a house, it is important not to put too much of your capital into the purchase: remember that with your wealth halved, your house is unlikely to be as good as the one that you had while there were two of you.

Too much into housing will either mean a really big mortgage or, if you are well off enough not to have a mortgage, you may have so

. . . any money that you have from the settlement should be put in the bank and left there for at least six months . . .

much in the house that you have nothing left to invest. Too much house, whether mortgaged or not, cramps other lifestyle options.

At the same time, resist the temptation to run away to live in Cricklewood (or the likes): housing may be cheaper there but job prospects and support networks may be very thin on the ground. You are better to rent in a main centre and have a good job than live and work with no career prospects in a small town.

Third, if there is anything left after the purchase of a house, it needs to be invested well. Initially it will do no harm in the bank while you think, but eventually you will need to invest it properly for the long term.

There is no rush to do this: you need a good, coherent investment plan that matches the way that you plan to live.

Whatever you might do with any investment cash, remember that the consequences will be felt for the rest of your life.

You may or may not be better off emotionally after divorce, but few people are better off financially. This is a time to move slowly while you think, consider all the options and plan for a new life. A FEW days before Michael Miller started as APN News & Media’s new chief executive in mid-June, he took the opportunity to host the company’s major shareholder, Irish telco billionaire Denis O’Brien, at a rugby union game. The risk was he was cheering on the other team.

‘‘He supported the Lions and I supported the Waratahs. He showed his passion, as I showed mine,’’ says Miller, grinning. The British Irish Lions thrashed the Waratahs 47-17.

Although Miller, who sits on the NSW team’s board, felt the pain of defeat that night, it was a professional victory to have been able to host the combative entrepreneur and his son.

‘‘He’s enthusiastic. He’s high energy. He’s engaged without being directional,’’ says Miller of O’Brien.

Miller’s predecessor, Brett Chenoweth, lost the support of APN’s largest shareholder, Irelandbased Independent News & Media, which O’Brien controls. This led to his abrupt resignation in February, along with then-chairman Peter Hunt and several independent directors, after they had pushed for a A$150 million capital raising that major shareholders were against.

Miller says the issue is dead, at least for the moment.

‘‘There has been no discussion of a capital raising.’’

Miller followed up his rugby outing with another important meeting the next week. For less than half an hour, he had a brief introduction to APN’s secondlargest shareholder, Simon Marais, managing director of fund manager Allan Gray.

These two critical meet-andgreets – INM and Allan Gray combined own about half of APN’s shares – were indicative of Miller’s negotiating skills, and his experience in navigating around the often-volatile world of media.

Although just 44, Miller is one of Australia’s most rounded media executives, following a career at News Limited (now called News Corp Australia) that spanned more than two decades.

Previously, he was managing director of Advertiser Newspapers in Adelaide, and was appointed group marketing director at 29 by Lachlan Murdoch, who was then News’ local CEO.

Murdoch, a News director, told APN chairman Peter Cosgrove, when he rang to inform him of Miller’s hiring, that: ‘‘You’ve got a good man. He’s our loss, but your gain.’’ Miller says Murdoch was ‘‘a great supporter of myself’’.

Miller started at News in 1991 as a research analyst in the group marketing department. By the end of his time there, he had also served on the boards of pay TV companies Fox Sports Australia (now wholly owned by News) and Sky TV in New Zealand (a former News investment).