Budgeting After a Divorce
Divorce is one of the most stressful life events you can experience. Financial disruption can add to this stress, which is why we recommend that you start by creating a post-divorce budget that can help you take control and pursue your personal goals.
Step 1: Make a Money Date
Your first step is to open your calendar and book a two-hour "Money Date," an appointment with yourself when you'll take a detailed look at your finances. Set up at a cozy cafe, or wherever you are comfortable and focused. Bring a laptop, notebook, pen, calculator, calendar, and passwords for your online accounts.
Step 2: Get Clear About Your Goals
Your short-term and long-term goals will provide perspective for making your budget, and motivation to stick to it.
- Short-Term: Looking at the next 12 months, ask yourself, "What are my short-term financial goals this year?" Perhaps you need new furniture, or a vacation, or you're going back to school. Write down all the things you'd like to accomplish in the next year, and estimate what they'll cost you.
- Long-Term: Now, looking at the bigger picture of your life, ask, "What are my long-term goals and dreams?" Perhaps they're related to retirement, sending a child to college, or making a long-distance move. As you list these goals, jot down any questions you have. We can help you evaluate costs.
Step 3: Add Up Your Income
Next, list every source of money that you regularly receive. If you work, include your total monthly paycheck after taxes. Include alimony, child supports, and any other sources of income. Tally up your monthly income, and write that amount down.1
Step 4: Write Down Your Expenses
Now, list your regular expenditures. Even if cash flow isn't a concern, it's vital to know where your money is going.
- Start with your Fixed Expenses. These are your non-negotiables: things like rent or mortgage, utilities, transportation, credit payments, and groceries.
- Then, list your Variable Expenses. These are the discretionary, flexible categories like clothes, entertainment, dining out, and savings. If you can, include a "fun money" category for treats.
Step 5: Prioritize and Adjust as Needed
With your income expenses in hand, you can fine-tune your budget, adjusting it to fit your lifestyle and goals.
Ideally, your monthly income covers both your fixed and variable expenses, with room to spare. If not, you might have some decisions to make. Start by reviewing your variable expenses. Then, consider ways to add income. Revisit your budget often and adjust it according to your priorities.2
Step 6: Assemble Your Dream Team
Now is the time to assemble a superhero team to support you in pursuing your goals. Include your financial professional, divorce lawyer, and accountant. You may also want to include your close friends, your therapist, and even your personal trainer or nutritionist. Their support can help you stick to your budget.
Step 7: Make it Practical
To stay on track, create a practical approach to follow regularly. Consider using a simple budgeting software, such as Mint or YNAB.3 Reach out to your support team regularly and be sure to call on us to help put numbers around those long-term goals you're saving for.
Remember: Change might be tough, but so are you. By keeping to a budget and staying focused on your goals, you can run the divorce marathon and cross the finish line stronger, wiser, and more financially prepared for what's ahead. Reach out to our team of divorce specialists today to get started.
1The information in this material is not intended as tax or legal advice. Please consult tax or legal professionals for specific information regarding your individual situation.
3This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.