The breakdown of a relationship can be emotionally difficult and draining. And whether you’re dating, living together, or married, sorting out who gets what only adds stress to an already tough situation.
While no one really plans for a breakup, there are steps you can take to help move forward on a financial level.
"With many couples combining their finances during a relationship through mortgage or rental payments, joint bank accounts or debt—financially untangling a relationship can be difficult, but there are steps you can take to help you feel more confident," said Rina DeGrazia, Vice President, Financial Education at TD Bank Group.
No matter the legal nature of your relationship, here are a few things to consider to protect yourself, your assets, and to feel more secure as you begin to move on.
Rename your beneficiaries
If you have a retirement savings plan, a will, life or health insurance, or a pension, you will need to check to see if your partner is listed as a beneficiary. If you no longer want them to receive a payout when you die, you will need to update the beneficiary information on those accounts or name your estate as the beneficiary.
While you are updating your beneficiaries, be sure to reevaluate your workplace benefits plan as well. If your partner is covered under your workplace benefits plan, you could opt for single coverage after you and your partner have acknowledged separating your finances or are both in the process of doing so. This way you could avoid paying more money for an individual who you no longer want to receive benefits.
Monitor joint accounts
Part of breaking up involves divvying up your assets and debts, but until that time keep an eye on what goes in and out of any bank accounts you share.
DeGrazia recommends opening your own chequing and savings accounts, and ensuring that any direct deposit information for payments made to you is updated.
Update your budget
If you're now living alone or plan to, your monthly income and expenses are likely to change. A new budget will help you understand the financial demands you may have to face and can help you get a more accurate picture of your future cash flow.
Check your credit score
Getting a clear and up-to-date picture of your credit situation would also be beneficial. There are two main credit bureaus in Canada that offer one free credit report per year (here are instructions for how to obtain them through Equifax and TransUnion), but this doesn’t include your actual credit score. But you can get your credit score from either of these bureaus for a fee.
Once you've got your report, there may be an opportunity to improve your credit score to help with future credit needs.
"There are many times in a relationship when you use both incomes to qualify for a financial product, like a mortgage or line of credit,” said DeGrazia, adding that you may no longer have the income or credit to qualify for these same products on your own.
After getting an updated look at your credit situation, reviewing which credit cards are linked to recurring or subscription-based services to either cancel these or change which cards they are linked to if needed, is also a good step.
Plan for the future
Now that you've updated your budget and taken a closer look at your credit and accounts it's time to reimagine your own financial goals.
If you already have emergency savings set aside for yourself in case you become sick or are out of work without a dual income to fall back on, a good next step would be to finally spend some time thinking about your longer-term financial goals.
Navigating the financial reality of a breakup can be difficult but taking small steps toward financial independence can help you feel more secure during a tough time.
Surrounding yourself with a group of trusted friends and professionals who can advise and help support you is also important, said DeGrazia, adding that engaging your financial institution as soon as you are able will also help with moving forward.
"That way you can start working towards rebuilding your financial confidence for the future."