After getting divorced, your financial situation will likely change drastically. It is imperative that you create a post-divorce budget to ensure you and your children can continue to maintain financial stability after the divorce is final. Read on for helpful tips and reach out to a Sussex County, Sparta divorce attorney for legal assistance.
How to Create a Post-Divorce Budget?
When creating a budget for your post-divorce life, it is crucial that you are completely honest with yourself about your finances. Transitioning to a single-income household can be difficult so consider the following steps. Use a spreadsheet or template to help you keep track of all of the following information.
1. Calculate your income
The first step in creating a post-divorce budget is determining your financial situation. Make a list of all your sources of revenue, including your salary, bonuses, tips, commissions, investments, alimony, child support, or other streams of income. Go back through the last few years of tax returns to ensure your number is accurate.
2. Track your expenses
Next, document all of your monthly expenses, including both fixed and variable costs. Fixed expenses include anything that remains the same every month, such as rent, mortgage payments, car payments, student loans, insurance, child support, alimony, etc. Variable expenses include anything that is subject to change, such as groceries, gas, transportation, entertainment, travel, and more.
Don’t just divide your previous monthly expenses in half, thinking that it will equal your current costs. Now that you and your former spouse are not together, you will incur your own expenses. It is important to be accurate so consider all costs.
3. Prioritize
After gaining an understanding of your income versus your expenses, you need to determine what your priorities are. You may struggle to adjust to your new financial situation in the weeks and months ahead, so cutting unnecessary costs out of your budget may be beneficial and help you navigate the transition. Figure out what expenses you need, like food, transportation, childcare, and housing, versus expenses you want, like eating out or shopping.
Cutting back on extraneous costs, at least for the first few months after your divorce, can make a huge difference in your financial comfort.
4. Create a savings plan
It can be tempting to just scrape by during this transitional period, but it is crucial that you are thinking about your future and your children’s futures. Set a small percentage of your income aside in your budget to ensure you can contribute to your savings even during this difficult time.
5. Figure out where you are at
Once you have all the necessary information for your budget, it is time to do the math and see if you can afford the lifestyle you are imagining. Subtract your expenses and savings from your monthly income. If you are left with a positive number or zero, then you are looking good. However, if that number is negative, you are overspending compared to the money you earn. You will have to make adjustments to either spend less or earn more.
It can be hard to make sacrifices and cut out certain expenses if they bring you joy or you are used to them. However, post-divorce is the time to make hard decisions. For more information and legal advice during your divorce, contact a skilled attorney today.
