Originally published April 2019
Revised July 2023
Budgeting – just reading that word may have made your eyes glaze over with boredom. It’s rare that clients come to me excited about the topic. But I know from experience that budgeting can be a powerful tool, especially in a divorce.
The period between filing for divorce and getting divorced can be a time when you feel like much is beyond your control. Creating a budget may help you regain a sense of control, and it can be a valuable tool when making critical decisions.
Budgeting Tip #1: What Is a Budget? (And Why Do You Need One When Going Through a Divorce?)
The first budgeting tip is to define the word.
For the purposes of our discussion, a budget is a list of priorities that guide how you use the money you take in. Having a clear understanding of where your money goes will help you make better decisions.
“Having a clear understanding of where your money goes will help you make better decisions.”
Those decisions might be as small as whether to eat dinner out one night a week or as big as whether to keep the house in your divorce settlement.
Your life is about to change.
Knowing beforehand what changes you need to make can keep you from courting financial disaster in the months and years after your divorce. The oft-quoted phrase “knowledge is power” is absolutely true when it comes to budgeting.
“…having a budget can be a useful tool in your settlement negotiations.”
Finally, having a budget can be useful in settlement negotiations. If you are asking for spousal maintenance[1] or a disproportionate share of the marital estate, a budget showing why you are making the request may bolster your argument.
Budgeting Tip #2: How to Create Your Budget
There is a good chance you’ve either never created a household budget or haven’t made one in many years. Don’t worry. Budgeting doesn’t have to be complex or difficult. Start with broad categories of expenses, which typically include:
- Income[2]
- Housing
- Utilities
- Living Expenses
- Medical Expenses
- Transportation
- Personal Care
- Child Expenses
- Other/Miscellaneous
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Budgeting for a life you aren’t yet leading takes some research.
Begin with the expenses you’re sure about (like how much you pay to get your hair cut) and mark items for research (like rent on an apartment in the area where you want to live).
Check your credit card and bank statements to see regular expenses like cell phone bills. And don’t forget to account for those expenses that only occur once or twice a year, like insurance premiums.
Are there debt payments that must be made?
If so, include those in your budget.
In this phase of the process, you are gathering information — you can expect to do a good amount of reading statements, searching the web, and making educated guesses.
Once you complete most of your categories, do a sanity check.
Are you going to be spending more than you take in?
If so, discuss your options with your attorney or financial professional. Can you ask for temporary spousal maintenance?[3]
If not, what expenses can be lowered or eliminated? Is it wise to ask your soon-to-be-ex-spouse to take on some of the community debt in exchange for assets?
If you were previously a stay-at-home spouse, do you need to consider returning to work outside the home? Do you need to pursue further education so you can find a better-paying job?
Budgeting Tip #3: Another Budgeting Tool
During your divorce, you’ll make dozens of decisions and almost never have perfect knowledge or information about any of them.
Budgeting can make at least a few of these decisions less stressful. While budgeting is only one tool in your toolkit, it is often vital (and one that you can craft largely on your own).
If you’re feeling overwhelmed with financial decisions or sorting out your finances, it might signal that you need to hire a financial professional to back you up.
Your attorney may be able to refer you to someone they trust. Two types of professionals you might consider working with are a Certified Divorce Financial Analyst™ (CDFA®) or CERTIFIED FINANCIAL PLANNER™ Professional (CFP®).
CDFAs like me specialize in the financial aspects of divorce and are well-positioned to help with everything from building your budgeting to assessing a settlement offer.
Want to learn more?
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[1] This is the term we use in Texas for alimony.
[2] For our purposes here, fill in the amount you bring home after pre-tax expenses and tax withholding. Income may also include items like child support payments and spousal maintenance payments.
[3] These are support payments your ex-spouse would make to you for a finite period after your divorce is final.
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