Put yourself F.I.R.S.T: How I came out of a separation financially sound (2024)

The thing that surprised me the most when I recently separated from my best friend and children’s father, was my girlfriends’ response: “Wow. I wish I was brave enough to be single.”

And I’m talking about, if not one-in-two of them, one-in-three. So, I’m breaking ranks with my female kind and telling you: you’re on notice.

Pretty universally, the barrier seemed not just psychological but financial. The unaffordability of going it alone. Or worse, the total economic inability. (This column is not about financial abuse, but that is perpetrated precisely to trap someone.)

Well, my ex and I will both come out of the separation financially sound because I – with his backing always – made certain smart money moves from the get-go.

These weren’t moves made selfishly for me though; they were moves for our family to put us all financially F.I.R.S.T. Which spells out – for ultimate safety – like this:

F – Fund

Bad things happen to good people – you might have read here that I/we battled breast cancer last year, too.

You can’t control that, but you can control how you deal with it and, crucially, whether you are financially equipped.

You need what I call a Holy Sh*t Fund for if/when sh*t happens. Trust me, it might.

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This should preferably be six months of your salary and if you have a mortgage, saving you lots of loan interest in an offset account beside it. Don’t panic if you have nothing near this amount currently, prioritise slowly building it up.

I – Insurance

Stay with me if your eyes just glazed over! You must ‘protect’ before you look to ‘prosper’.

Health insurance probably saved my life. Having it gave me the option to stop that type of cancer in its tracks (hopefully) with extreme – and expensive – surgery.

For me, private health is non-negotiable. And the number of people dropping it in the cost-crunch with which we are contending is a great worry.

On top of that, income protection insurance helped me substitute my salary while I was recovering. As a single person with no second salary, it’s vital, and the earlier you get it, the cheaper it is.

Ditto with life insurance, which usually now comes with an ‘immediate payout’ clause on the diagnosis of a terminal illness.

You need at least enough to cover your debts and raise your children to the age of your choice. Get your triple protection in place as a matter of urgency.

R – Rates, not mates

Forget misplaced loyalty to a large lender, words cannot express how important the cheapest home loan is, but numbers can. The difference between the average (undiscounted) biggest and the best interest rates right now exceeds 3 per cent.

Still haven’t sat bolt upright? Then realise that’s an enormous $1052 on a typical $600,000 Aussie mortgage. Over 25 years of potentially overpaying interest, it is $315,681, an amount that could instead go into your savings.

The Reserve Bank’s run of 2.25 per cent interest rate rises have added just $804. Just saying.

Even after the expected cash rate rise on Tuesday, you will be able to get a loan comparable in quality and features to a big bank product for an interest rate starting with a ‘4’ – and at the lower end of it.

S – Sort your super

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Women still typically retire with 23.4 per cent less in super than men according to the Association of Superannuation Funds of Australia (ASFA) – $137,050 versus $178,800.

The trouble is that super ‘bakes in’ limitations like a lower salary (the gender pay gap is still 14.1 per cent) and maybe time out of paid work to raise children.

Women then often have to stretch a smaller retirement stash across more time, statistically living about four years longer than men.

But this is a problem for which there are whole-of-family solutions (and even if things go wrong and you split, equalising super along the way saves the person with more having to give some up).

An annual spouse contribution and co-contribution can give you a tax-advantaged or even free annual kick. Look to mop-up, when you are both back earning, any unused super limits in the previous five years.

It’s also important to check you are both in the highest-performing, lowest charging funds.

T - Test

Our to-do lists are long and self-care is at the bottom of them, but it’s important to not put off doing the medical maintenance and checks that you know you are supposed to.

Ladies, get a mammogram. And preferably an ultrasound too as mammograms can miss tumours, as they did for me.

Gents, go see your doctor for that medical you have been putting off. Health is wealth.

And getting back to that, my kids’ wonderful father said to me recently: “It’s because of you that we will both come out of this financially okay.”

Future-proof your life. FIRST.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circ*mstances before making any financial decisions.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.