After going through a separation, there is often a mix of relief and trepidation. For 2-3 years, your life, attention, and energy have been focused on surviving the process. This might include constant back-and-forth negotiations, juggling family challenges amplified by co-parenting with an antagonist, and struggling to balance finances while managing two households.
As you leave that environment, a common theme among my clients is the desire to make the most of what they have. They want the best return on their pool of assets to live the life they deserve. Ultimately, they seek independence.
When addressing this need, I always consider a few major factors:
Where are you living, and do we own it? The second-best investment is not a home to live in.
What are you doing for income, and do we generate it via investments? The second-best investment isn’t shares, bonds, or an investment property.
What does life look like in retirement? And no, the second-best investment is not within superannuation.
It's not cryptocurrency, private credit, or cash. It's yourself.
It sounds corny, but let me explain what I mean by this and how I implement it with my clients.
The Benefits of Investing in Yourself following Divorce
Ideally, in a relationship, you take care of your spouse, they take care of you, and if either of you feels left behind, you speak up. However, if you are going through a divorce, chances are one or both of you have not been caring for the other. Add the weight of the divorce process, children, and there’s a good chance you haven’t been taking care of yourself either.
Investing in yourself means giving yourself permission, and literally money, to spend on increasing your well-being in non-financial areas.
When allocating proceeds of the settlement, I always look to allocate a nominal amount to self-investment, whether it be a process, course, or professional service that can help my clients establish a new normal over the next 12 months or beyond.
Different Areas to Consider Investing In
Investing in How You Feel
It makes logical sense, but research also backs it up: therapeutic interventions can lead to significant improvements in mental health, facilitating a smoother recovery process for divorcees (Amato, 2010; Lebow et al., 2012). You can do this through:
Working with a psychologist
Working with a counsellor
Working with a life coach
Working with a spiritual coach
Investing in how you move
This extends deeper than simply ‘winning the breakup.’ Research shows that exercise is more effective than some medications in dealing with mental health challenges (Craft & Perna, 2004; Mikkelsen et al., 2017; Singh et al., 2023). Establishing a new routine is also key (Plata, M. 2021) as it helps you build your new life away from your former life. To avoid injury, you could invest in:
A personal trainer
Lessons, coaching, and gear for a new sport or hobby (you may need to try a few)
An Osteopath or Physiotherapist
Investing in How You Look
This might sound vain, but if you look good, you feel good. Personal styling can play a significant role in boosting self-esteem and mental well-being. Research backs this up; improvements in self-image can positively impact overall mental health, aiding in the recovery process (Kwon & Shim, 1999; Cash, 2004). Most professionals in this space focus not only on helping you find your style but also on teaching you how to make the most of it yourself. Consider investing in:
Personal stylists (clothing)
Makeup stylists
Buying a new wardrobe
Barriers: Scarcity and Permission
This all sounds lovely, but for many post-divorcees, it can feel like there isn’t enough money or time to invest in these areas. There is always something more important that needs to be done that isn’t focused on themselves, whether it be a ‘future’ state, their children, or other family members.
Breaking this stigma is an important part and benefit of the process, allowing yourself permission to spend money on yourself. It is not my job as a financial adviser to help break through this directly, nor is it my job to assist with any of the aforementioned areas. What I do is show that you can afford it and how it doesn’t impact your long-term plan. With that confidence and context, you can give yourself permission to invest in yourself and navigate the post-divorce process much faster and stronger.
Here's an Example
Meet Jacinta. She is 58 and planning on retiring at 65. She is separating from her husband of 30 years. They have two adult kids, both moved out to study. She works in risk for a bank, having spent most of the last 15 years working part-time to take care of her family while her ex-husband worked full-time in law. She would like to go full-time now that the divorce is done. From the settlement, she will receive a combination of property, cash, and shares. Her ex-husband has kept the house. She has $1.2 million left after paying legal fees, advice fees, and clearing the debt on the property she will live in.
Let’s look at two scenarios (noting I am ignoring the different tax structures and approaches we can make):
In one instance, she invests all $1.2 million of the money (Option A).
In the other, we invest $1.175 million and then invest $25,000 into a year-long program with a wellbeing coach that includes makeup styling sessions, yoga retreats, a mindset coach, and a community of like-minded women.
Assuming a return of 6.45% (Gross) including 2.7% dividend income, if she wanted to use the dividend to supplement her lifestyle, for the first year:
In Option A, she receives an estimated $32,400.
In Option B, she receives $31,725 – a cost of $675.
By age 65:
In Option A, she has a balance of $1.55 million.
In Option B, she has a balance of $1.52 million, a cost of $7,348 after taking out the cost of the course.
In the grand scheme of things, her financial situation is largely the same. However, from that initial investment in the first 12 months, she likely experiences a substantial improvement in her independence, identity, and mental health. The numbers are similar whether she draws the dividends or not, or depending on how and where the money is invested.
It’s important to note too, while I gave a comprehensive example above, I have seen great results from clients getting a stylist and a new wardrobe, getting a coach and focusing on running 10km, or simply putting $5,000 aside that they can only spend on themselves! It doesn’t have to be completely transformative to be hugely beneficial.
So, What Is the Best Investment following Divorce?
Ignoring obtaining a fantastic family lawyer, the best investment you can make, in my opinion, is financial advice from a Divorce Specialist Values-Based Financial Adviser (like me). I am biased, but looking at the example above – the education, advice, and context a financial adviser can offer during and after a divorce enable you to take steps with the confidence that they are the right steps for you, considering all variables. Coupled with our ‘bread and butter’ of ensuring things are done in a tax-effective way that is in your best interest, you pay for our fee multiple times over.
In closing
Investing in yourself after a divorce not only helps you move on with your life sooner, but it also enhances your long-term well-being, paving the way for a fulfilling and independent future. It is different for everyone, but the key is giving yourself a bit of an allowance to find the option hat is best for you. Oh and for the third, fourth and fifth best investments, get Financial Advice!
References
Amato, P. R. (2010). Research on Divorce: Continuing Trends and New Developments. Journal of Marriage and Family, 72(3), 650-666. doi:10.1111/j.1741-3737.2010.00723.x
Lebow, J., Chambers, A., Christensen, A., & Johnson, S. (2012). Research on the Treatment of Couple Distress. Journal of Marital and Family Therapy, 38(1), 145-168. doi:10.1111/j.1752-0606.2011.00249.x
Craft, L. L., & Perna, F. M. (2004). The Benefits of Exercise for the Clinically Depressed. Primary Care Companion to The Journal of Clinical Psychiatry, 6(3), 104-111. doi:10.4088/pcc.v06n0301
Mikkelsen, K., Stojanovska, L., Polenakovic, M., Bosevski, M., & Apostolopoulos, V. (2017). Exercise and Mental Health. Maturitas, 106, 48-56. doi:10.1016/j.maturitas.2017.09.003
Singh, B., Olds, T., Curtis, R., Dumuid, D., Virgara, R., Watson, A., Szeto, K., O'Connor, E., Ferguson, T., Eglitis, E., Miatke, A., Simpson, C. E., & Maher, C. (2023). Effectiveness of Physical Activity Interventions for Improving Depression, Anxiety, and Distress: An Overview of Systematic Reviews. British Journal of Sports Medicine. doi:10.1136/bjsports-2022-106195
Plata, M. (2021). The Power of Routines in Your Mental Health. Psychology Today. Retrieved from https://www.psychologytoday.com/us/blog/finding-nirvana/202105/the-power-routines-in-your-mental-health
Kwon, Y. H., & Shim, S. (1999). The Influence of Physical Attractiveness on Body Image, Self-esteem, and Depression Among Korean Female College Students: With a Focus on the Effects of Body Mass Index and Aging. Journal of Youth and Adolescence, 28(5), 635-646. doi:10.1023/A:1021676209265
Cash, T. F. (2004). Body Image: Past, Present, and Future. Body Image, 1(1), 1-5. doi:10.1016/S1740-1445(03)00011-1
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