Going through a divorce can be incredibly challenging, especially regarding finances. Consider creating a post-divorce budget to help you regain control and work toward your personal objectives. Follow these steps to get started:
Step 1: Schedule a Money Date
Book a two-hour “Money Date” with yourself to assess your financial situation thoroughly. Find a comfortable and focused setting, such as a cozy cafe, and gather essential items like a laptop, notebook, pen, calculator, calendar, and online account passwords.
Step 2: Define Your Goals
Your short-term and long-term goals will provide perspective for making your budget and motivation to stick to it.
- Short-Term: Looking at the next 12 months, ask yourself, “What are my short-term financial goals this year?” Perhaps you need new furniture or a vacation, or you’re going back to school. Write down all the things you’d like to accomplish in the next year and estimate what they’ll cost you.
- Long-Term: Now, looking at the bigger picture of your life, ask, “What are my long-term goals and dreams?” Perhaps they’re related to retirement, sending a child to college, or making a long-distance move. As you list these goals, jot down any questions you have and share those with your financial advisor.
Step 3: Calculate Your Income
Next, list every source of money that you regularly receive. If you work, include your total monthly paycheck after taxes. Include alimony, child support, and any other sources of income. Tally up your monthly income and record that amount.
Step 4: Outline Your Expenses
Now, list your regular expenditures. Even if cash flow isn’t a concern, knowing where your money is going is vital.
- Fixed Expenses: These are your non-negotiables, things like rent or mortgage, utilities, transportation, credit payments, and groceries.
- Savings: Treating your savings as an expense is important as it encourages you to save regularly. This is money you set aside from your income for future use, including an emergency fund, retirement funds, or money for goals like buying a house or funding a child’s education.
- Variable Expenses: These are the discretionary, flexible categories like clothes, entertainment, and dining out. If you can, include a “fun money” category for treats.
Step 5: Prioritize and Adjust
With your income and expenses in hand, you can fine-tune your budget, adjusting it to fit your lifestyle and goals.
Ideally, your monthly income covers both your fixed and variable expenses, with room to spare. If not, you might have some decisions to make. Start by reviewing your variable expenses. Then, consider ways to add income. Revisit your budget often and adjust it according to your priorities.
Step 6: Assemble Your Support Team
Engage the expertise of professionals like financial advisors, divorce lawyers, accountants, and estate planning attorneys to help you stick to your budget and pursue your short and long-term goals.
Step 7: Be Practical
To stay on track, create a practical approach to follow regularly. Consider using a simple budgeting software or reach out to your support team for guidance.
By adhering to a budget and remaining focused on your goals, you can navigate the challenges of divorce and emerge stronger and more financially prepared.
Contact our team of financial advisors today to help you begin your journey towards financial independence.