Relatively few people going through divorce take the time to budget. Relatively few of my clients take the time to budget. Everybody who takes the time to budget during divorce is better off because of it.
Think about it. You once lived in one household, and now you’re going to be living in two. Unless you have extra money lying around for living expenses (and few of us do), that means the money that supported one household is now going to have to support two. That means one or both of you will be living on less money in the future than you have in the past.
Angela was adamant that Frank needed to deed the house to her as part of their divorce settlement. The kids were going to be living with her, the $475,000 house was in a wonderful neighborhood, and she believed it crucial that she and they stay put. Frank didn’t think it made sense, but of the six billion or so people on earth, Frank was the six billionth most credible source of evidence for Angela just then. It was only when Angela sat down and looked at her budget that she realized how unrealistic her dream was. She couldn’t count on alimony, and she would need the child support to put food on the table and pay for soccer shoes. When Angela finished her budget, she was in tears, but she was ready to accept the painful truth that she and the kids were going to be moving.
How will you do your budget? It will be painful. It will involve compromise. It will involve disappointments for you and/or for your children. But you can get through it.
Start with your income, and make sure you estimate your taxes. Next it’s time for your expenses. I know you don’t know for sure what your expenses will be. Just do the best job you can. You should finish with a monthly total expense figure for both you and your spouse.
The Moment of Truth
When you net the two figures together, if you’re like most people going through divorce, you will see that the two of you together plan to spend more than you make. The real work begins. Assuming that you don’t have the flexibility to increase your income at will, it’s time to cut your expenses. It’s okay for it to hurt. But you still have to do it.
I often have clients ask me if the income and the expense figures have to match. Remember, the whole idea here is to take control of your divorce. No, you don’t have to make them match. You don’t have to do anything that doesn’t make sense to you.
I’ve just learned over time that the best way to position yourself to move on after your divorce is to know in advance what financial challenges you’re facing. It’s just a tool. You use it the way you see fit.