For many couples, the very idea of divorce is emotionally traumatic for both spouses, regardless if one or both of you decided that the marriage was over. It's a stressful time and often it's easy to overlook some practical details of the divorce, like your post-divorce finances. Will you have enough income to meet your needs?
You can take steps to reduce the strain on your finances that a divorce will have by preparing and sticking to a budget.
Get Your Financial House in Order
No matter if you or your spouse handled all the finances and bill paying-during the marriage, it's time to educate yourself on the costs of surviving on your own. Preparing a monthly budget will force you to recognize what it will take to meet your needs. The key is to get a good idea of your income and expenses - how much money is coming in and how much is going out each month.
Estimating Your Income
Here are the steps to estimating your monthly income after divorce:
- List your monthly net salary or wages
- Add the monthly average of any net or after-tax overtime, commissions, tips or bonuses
- Add or subtract any court-ordered monthly alimony or spousal support payments
- Add or subtract the amount of monthly child support payments you pay or receive
- Add any monthly interest, dividend or other income you receive, and deduct estimated income taxes for those amounts
The total amount is your estimated monthly income you'll have to pay your bills and living expenses.
Estimating Your Expenses
This may be more difficult because you won't really know what your actual expenses will be until after the divorce. You can use your current bills and canceled checks as a guide. You can also call service providers such as cable, phone and utility companies, day care centers,schools and insurance companies for quotes or estimates.
It is a good idea to group your monthly expenses into the following categories:
- Household - mortgage (including taxes and insurance), rent, utilities (gas, electricity, water, phone, cable and trash collection), groceries (including dining out), termite control, lawn care and repair costs
- Automobile - car loan payments, licensing and registration, gasoline and maintenance and repair costs
- School - tuition costs, school fees, school supplies, class photos, field trips, yearbooks and school lunches
- Day care - include before-school care, after-school care and babysitter services
- Health care - co-payments and deductibles, prescription drugs, eyeglasses, dental care, braces and other health care costs not covered by insurance
- Insurance - life and health insurance costs not figured in determining your net income
- Credit cards and loans - scheduled payments on credit cards, department store cards, lines of credit, installment loans and other personal loans
- Miscellaneous - the "catch-all" category that includes clothes, work lunches, hair care, birthday and holiday gifts,pet expenses, entertainment and hobby expenses, vacations, subscriptions and dues, donations,retirement savings and any other additional expense that doesn't fall in the other categories
Total your expenses and compare them with your income. Shocking, isn't it? Your anticipated expenses almost always will be greater than your income.
Now you have some tough but necessary decisions to make. Taking on another job is certainly an option and may even be a necessity. But you should first try to cut unnecessary expenses.
Compare what you need to survive versus what you would like to have. Even your fixed expenses can be reduced:
- Sell the high-priced home and car for something more affordable
- Downsize the cable and cell phone service and eliminate the land line
- Cut such luxuries as regularly dining out, weekly movies, annual vacations or amusement park season passes
- Avoid applying for new credit cards or loans to pay for any luxuries
Stick to your budget, and over time, you'll be pleasantly surprised at how much your financial condition has improved, and even more surprised at how well you can take care of yourself.
Questions for Your Attorney
- My estimated expenses after divorce are more than my estimated income, what should I do?
- I won't be able to afford health insurance through my job after my divorce, so will the court order my soon-to-be former spouse to pay for my health insurance and for our two children?
- Is there any way we can get my soon-to-be ex to take the majority of our debts in the property settlement?