The next step in preparing for divorce is to make two budgets (one that shows the situation in the house before the divorce filing, and one that is your estimated budget for after the divorce).
Most folks don't like to prepare one monthly budget, so I know I'm asking a lot to suggest that it is helpful two prepare two of them. There is a method to the madness though. It is important to know what it costs to run your household currently. Equally important is to have an understanding of what your costs of living will be after the divorce. Let's take each in turn.
A. Know your current monthly budget
Knowing the monthly budget is important for the following:
- In an alimony case, it is critical to show the standard of living and the financial need.
- It is helpful in assessing specific needs of the children that may not be covered in basic child support (e.g. particular medical needs or private school expenses).
- It will help you in planning your post-divorce budget.
- If your spouse is self employed and under reporting his income, showing that monthly expenses exceed what they claim they make can show they are attempting to hide their true income.
- A judge may utilize this information to determine temporary support while the case is pending.
- You should know this stuff in order to properly manage your finances whether you are getting a divorce or not!
B. Make an estimated budget of post-divorce expenses.
This is important for your personal planning and will likley influence your objectives in the divorce negotiations. You need to know what you will need financially in order to evaluate your settlement options or what you will ask the judge for in a trial.
This will undoubtedly take some estimating on your part. But, that is why it is called an estimated budget. It will be a work in progress. The point is to give some forethought to what your living expenses will be as you start the new chapter in your life.
C. How to make your monthly budgets.
If you already maintain your checking account records on a software program like Quicken then the process is easy. You can simply print out a monthly budget report. If you don't then you will need to sit down and look through your check register and/or your spouse's check register for the past three months. This will reveal the expenses you may monthly and quarterly (divide the quarterly expenses by three and enter them in the budget as a monthly expense).
You will then want to think about any annual or semi-annual expenses you may have such as for life insurance, homeowner's insurance, etc. and convert those to a monthly figure and enter it on the budgets also.
In setting out your budget, try to be as realistic as possible. You should be conservative in your budget (meaning don't understate the expenses and end up stating a budget that doesn't realistically meet your needs) without grossly overstating the budget (which a judge would frown on should the case go to court). It is admittedly a fine line. The best advice is to base it on as real numbers as possible.
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02 | 22 | 2007 Posted By Michael Sherman
Preparing for Divorce: Step 3 - Make photocopies of all the financial records
Continuing our series on practical steps to take when it becomes obvious that divorce is imminent, we are now on to step 3. Step 3 is simple, but important.
Step 3 is to make photocopies of all of the pertinent financial documents.