Why Numbers Are Your Best Friends in Divorce
You only get one chance to get this right and understanding your finances is the key.
Having accurate financial information and knowing your post-divorce budget will provide you with the information you need to make choices when evaluating your settlement options. They also guide you to design a post-divorce life that you can maintain. Ain’t nobody got time for getting in financial trouble as soon as you start your new life.
But, what if you don’t know your numbers?
DO. NOT. PANIC.
Seriously, don’t. I know it can feel intimidating – especially if you haven’t been very involved in the family finances or if you aren’t currently earning much. Go get chocolate or some ice cream (or wine) and come back in ten minutes – then we’ll get started.
Previous Lifestyle
One of the best places to start is using your past marital lifestyle as a baseline.
Gather 6-12 months of checking, savings and credit card statements and break your spending into the following basic categories. It doesn’t matter if you look at your expenses on a monthly or annual basis as long as you are consistent across all categories.
Check to see if your bank or credit card company provides reporting that will categorize charges for you – your work may already be done for you!
- Housing – mortgage/rent, property taxes, HOA dues, insurance
- Utilities – gas, electric, propane, phone, tv/internet
- Food – groceries, dining out
- Auto – car payments, gasoline, repairs, insurance
- Medical – health insurance, doctor/dentist visits, prescriptions, physical therapy
- Entertainment – travel, concerts/shows, sports
- Clothing – personal purchases, dry cleaning, uniforms
- Personal Care – hair/nails, gym/yoga,
- Misc – gifts, pets, donations
- Children – education, activities, school lunches, childcare
Note your income and expenses as you go through statements – then calculate either an annual amount or a monthly average. My Ditch Your Divorce Fears Financial Planner has all the worksheets and tools to help you get through this step plus budgeting and more.
Get the Ditch Your Divorce Fears Financial Planner
Remember This: Try your best to be thorough and include expenses that don’t occur regularly – you want to get the best, most realistic view of your financial needs.
Post Divorce Budget
Congratulations! Now that you’ve done the hard work at analyzing what your lifestyle has looked like in the past, it’s time to see what adjustments might need to be made for your post-divorce life.
- Where will you live?
- Will you be receiving child support or spousal support (maintenance)?
- Are you planning to return to work, get additional training or make a career change?
- How close are you to retirement age?
- You will have a mortgage payment (along with taxes and insurance) and the uncertainty of any unexpected repairs that become necessary.
- You will likely be asked to give up an asset of equal value in exchange for the value of the equity in the home (market value minus mortgage balance).
- You may owe capital gains tax when you sell the home if it has significantly increased in value since the original purchase.
- Home equity is a non-liquid asset – meaning you cannot access it quickly should you need money for emergencies.
- Your home may not increase in value as quickly as an investment account will meaning your net worth will also not increase as much in the future.
Unless you have a crystal ball, you can’t predict the future perfectly. But you can make a best guess about what kind of cash flow it is going to take to cover your bases post-divorce.
If you’ve been a stay-at-home mom or are earning a lot less than your spouse, I know this can be intimidating when you first look at the numbers. I want you to understand that knowledge is power. And once we identify something and look it in the eye, we can make a plan to address it. Keep the faith.
Remember This: It can be helpful to create a few columns on your budget worksheet so you can play around with different scenarios to see the impact of different decisions.
- What if you sell the house?
- What if you take a lump sum instead of monthly spousal support payments?
- What if you take more of the debt?
- What if you work 30 hours a week instead of 20?
Need More Help?
It’s what I do. Let’s tackle these numbers together so you can get out from under that feeling of overwhelm. We can walk through it side-by-side or you can send me your statements and I’ll do the digging for you.
Either way, you will have the information you need to make good decisions – and that’s a big win!
Schedule a complimentary consultation – let’s get to know each other and talk about how I might help you get to know your numbers.
Wishing you strength and wisdom,
