Setting up a budget during a divorce can not only help you remain financially solvent, it may also help facilitate the divorce itself. While you might have concerns regarding your finances as you begin your divorce, keep in mind that by incorporating some budget strategies into your planning as your divorce progresses, you can minimize the financial drain of the divorce, as well as help ensure that your life afterwards has a good financial beginning.
List Income and Expenses
Budget planning begins with knowing what you have to budget, and where your money is going. Listing all your sources of income with corresponding amounts in one column enables you to see the amounts with which you're working, including any temporary spousal or child support you're receiving during the duration of the divorce. Breaking up expenses into fixed and variable ones helps identify where your money is going. Fixed expenses are obligations that remain the same every month, such as the mortgage, insurance, auto loan payments, utilities, satellite or cable, child care, phone service and any temporary support you have to pay. Variable expense are everything else, such as monthly grocery, gasoline and credit card expenses.
List Assets and Debt
Listing all the assets you have, including those you own jointly with your spouse, identifies sources of cash you may not have considered. Life insurance policies and retirement accounts and any savings should go on this list. Also list your debt. Include items such as your mortgage, auto loans and credit cards.
Estimate the Remainder of Divorce Costs
If your divorce is contested and you've hired an attorney, she may be able to estimate what the rest of your divorce will cost. An experienced divorce lawyer should be able to estimate the rest of your expenses based on how your divorce has proceeded so far. If you divorce is straightforward, the fees will be standard, but if your divorce is contentious and you anticipate going to trial over custody or property division, your attorney can adjust to take this into account. Some attorneys have fee structures so standardized that they have fee calculators on their websites to give you a cost range even prior to the start of your divorce. If you're divorce is uncontested and you're going it without an attorney, you might want to include the fees of a mediator to help facilitate a settlement.
Create Your Budget
Your budget will ideally reflect more income than expenses, and using your lists, you can work with the numbers to make this happen. You may identify ways to maximize the yield of your income sources, or you may decide that they are dead ends and a change or even further education is necessary to increase your income. Your attorney may be able to approximate how much support you're likely to receive, or how much you're likely going to have to pay. You can likely cut variable expenses and eliminate some fixed expenses, at least temporarily. You can also liquidate assets, including life insurance and retirement accounts to pay off debt. While your spouse may own half of these assets, you can liquidate your half after the divorce is finalized.
Consult a Certified Divorce Financial Analyst
Knowing which assets you want to keep for use in furthering your financial future helps in planning your property settlement negotiation. Consider taking all your budget figures to a certified divorce financial analyst and having her analyze what assets you should request in your divorce settlement to cover your debt and expenses, including the cost of the remainder of the divorce. A CDFA will factor in the tax consequences of keeping and liquidating various assets and will even consider future cost-of-living increases to help you determine exactly what you need in your settlement agreement.