Post-Divorce Budgeting: Your 9-Step Guide to Financial Stability

When it comes to your budget, be objective. Begin by gathering documentation. This includes bank and credit-card statements for the last year. As you itemize your expenses, avoid the “double dip.” For example, if you buy groceries on your credit-card for the points, don’t count your grocery purchase and the credit-card payment.

Cash withdrawals at the bank machine is an area most people miss. You want to be able to account for those funds.

When using our Free Divorce Budget Worksheet, a good test is to have a number in each expense category. Then have a trusted partner (objective friend) review your inputs. Start with the pre-separation scenario using the Free Divorce Budget Worksheet found in the Preparing for Divorce companion workbook.

With two versions of the worksheet, fill in pre-separation expenses and post-separation projected expenses. Go to the post-separation chart and bring over each expense with an increase or decrease in its value. For example, an increase would be snow removal, if you would need to contract it out. Food expenses would probably decrease.

For now, focus on expenses. Income and child/spousal support amounts can be added later.

Now see what you can reduce or trim

Fixed expenses are those that you have every month (car payments, mortgage payments, insurance).

Consider these questions when thinking about cutting costs:

• Will you be downsizing to a smaller place?
• Can you downsize your current car?
• Can you reduce any insurance expenses?
• Do you need a cellphone and a landline in your home?
• Can you live without bottled water delivery, etc?

Think about your expenses in two categories:

• Regular: recurring bills like your cellphone, hydro or mortgage
• Irregular: bills you pay here and there throughout the year.

Irregular expenses may be:

• Back-to-school expenses
• Tuition
• Birthdays
• Vacations
• Christmas/Hanukkah

Fluctuating expenses typically include those little indulgences we enjoy. These are things like:

• Dining out
• Hair cuts or manicures
• Your morning Starbucks
• Golf club fees
• A gym membership

Try to cut out all expenses not absolutely necessary.

When you compare your income to your expenses, you may see a noticeable imbalance. Go back and decide what you can cut.

• Can you brown bag your lunches?
• Can you eliminate those movie nights?
• Maybe doing your own hair colouring or nails for now, is an option?
• Contact your creditors and request for lower payments. Most creditors will work with you to make sure you don’t fall behind.
• Keep cutting needless expenses until you have funds left over at the end of the month.

Remember, your changes don’t need to be permanent. You just want to try to trim down until you can increase your income. Once you’ve been on your own for a while you’ll know how far you can stretch your dollars. When you recognize you can have the extras back at some point, it is much easier to eliminate them now.

Consider your wants versus your needs. Survival may come down to cutting everything from your budget but the needs. Your priorities may have to shift. Realistically, many things you thought were necessities many become discretionary.

Look closely at the talents you possess and get creative in ways you can build your cash flow. Can you do freelance writing? Do you have artistic ability? Could you do home maintenance for others? One client of mine did all his friend’s oil changes until he paid off some credit cards. Put on your thinking cap, and you’ll come up with ways to earn extra monthly income.

It may seem tempting to use a credit-card rather than giving up a luxury you enjoy. Don’t give in to the temptation. It’ll make your future financial outlook much glummer for much longer. Don’t allow the emotional stress of divorce cause you to spend more than you can afford.

Financial problems bring stress. Avoiding that stress will make it easier to give up things you can live without. Your situation isn’t permanent. This, too, shall pass. Your financial picture need not be as bleak as it first appears. Use your creativity and self-control to make needed changes, and you’ll be back on your feet much sooner.

Working with numbers can be mind-numbing, but technology provides excellent tools to make budgeting easier. Free budgeting apps are available for your computer or phone that can help you track your money and keep yourself on track. These tools make it easier to stick to your budget goals and manage your new financial situation.

When you create a post-divorce budget, planning for the future isn’t the only thing to consider. You also need to set aside enough money each month to cover your living expenses, such as housing, utilities, and groceries. Avoid taking on any unnecessary luxuries until your finances are in order.

You can also use websites to check your credit score and credit report details. These resources help you track your spending habits and manage your new income better. Monitoring your credit score is crucial as it impacts your ability to secure a new home, credit card, or even a loan for long-term goals.

Additionally, budgeting apps can assist in creating a practical budget, setting financial goals, and planning for future financial needs. By integrating technology into your financial planning, you can achieve a clear understanding of your financial situation and make informed decisions to secure a financially stable future.

When you separate, you are likely to face a new set of bills as one household income becomes two. Work out your new budget as soon as possible with our helpful tools and advice.