In this episode, we talk about the “B Word.” BUDGET. Mention the word “budget” and reactions can vary from wide-eyed to confusion to sheer panic, but rarely do you receive a positive reaction. Mention the words, "lifestyle analysis,” and the responding look can be very similar. However, when going through the process of divorce, these two concepts are critical components before, during, and after divorce.
How many of us even think of our lives as “lifestyles?” When dating the person who became your spouse, it might have been the difference in lifestyle that was part of the attraction. Here’s this person that you really like and they’re bringing something new into your world. You get married, and now you’re faced with aligning your lifestyles, creating a new shared lifestyle together. Sometimes, your lifestyles are too incompatible for the long run, and you head for divorce.
Lifestyle is an important aspect to consider, especially when we have to make shifts in our budget.
Lifestyle Analysis vs. Budget
What is a “lifestyle analysis” and how does it relate to a budget? Your lifestyle is the way you’ve become accustomed to living. Do you dine out a lot? How large is your marital home? What car do you drive and what are its maintenance costs? Do you take family vacations, attend events, have a cleaning service? When going through a divorce, one of the first questions you’ll need to answer is what is your financial need regarding support, what is the lifestyle you’re accustomed to living, and how will those two factors work together.
Your budget is made up of the items and expenses you need to maintain a household. What are your expenses? What is the income you need for your cash flow? What are the “extras” that come up? Budget is a critical component before, during, and after divorce because the court system, your mediator, or anyone assisting you through the process will use your budget as a guide for what your needs truly are. Other factors -- if you're a business owner or receive bonuses from your employer -- aren't as apparent as a paycheck, so the ability to recreate your expense list and know your lifestyle is really important. It'll help them make sure you have what you need moving forward.
Know also that if you lived on a shoestring budget during your marriage, that shoestring is going to get a little thinner, especially during the divorce process. Prepare your budget based on a household income of one, especially until your support is decided and starts coming in. Even after all of this, if you can’t meet your budget, maybe you can negotiate a raise with your employer or arrange a loan from a family member to tide you over.
There’s no question; your money mindset has to change in divorce.
Put It on Paper
Committing your budget to paper will help you think through the process, and you’ll have it to keep you accountable. Laying it out like this will help you know exactly what you need, helping you know how to adjust, even helping you decide what type of job to get. Some of the categories you’ll encounter as you prepare your financials for divorce are:
Food Expense: groceries, toiletries, cleaning supplies, and casual dining out.
Auto Expense: car payment, gasoline, maintenance
Clothing Expense: shoes, clothing purchases that are necessities, repairs/alterations, and related items
Laundry Expense: cost of laundry service, dry cleaning
School Expense: tuition, supplies, field trips, lunch money, dues, tutors, locker rentals, arts & crafts supplies
Entertainment Expense: fine dining, sporting events, concerts, movies, theater, vacations
Incidental Expenses: cosmetics, hair and nail appointments, books, magazines, business dues, memberships, pets, donations, gifts, hobbies, and other outstanding payments
Home Appliance Expenses
Savings Accounts (ideal goal is to save 10% of your annual income)
College Tuition Savings
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