Getting a divorce is a life-changing decision. It will affect all aspects of you and your family’s lives. Your spouse, your kids, even your dog’s life will be different.
While the beginning of your new life may be a difficult transition, expect it to get better as time goes on. The hope, especially if you have kids, is that you and your ex reach a mutually beneficial parenting plan and that your relationship with each other is amicable. The reality is that sometimes relationships are torn beyond repair.
One relationship that you should always be working on improving is the relationship with your finances. We are all happier when we don’t have to manage unsavory finances. Creating a budget is a great way to achieve a post-divorce financial piece of mind.
To achieve this, consider following the three steps highlighted below.
1. List every income source and expense
Shying away from the word “every” won’t help you here. Create two sections and list all of your income sources (job, alimony, child support, investments, savings) on the left side. On the right side, list every monthly expense (rent, mortgage, utility bills, loans, credit card payments, child care, food, education, gas, average extracurricular spending) and anything else that comes to mind.
If you end up have disposable income after you have added up both sections, that’s great, but always save room for an expense you might have missed or an unforeseen expense, like a car repair. If you do miss something, it’ll arise at some point, and you can adjust your list and budget accordingly.
If your expenses exceed your income, you’ll have to get creative. The goal now is to increase income and downsize expenses. This could mean asking for more hours at work or looking for freelance work and side hustles to up your income stream. You could also consider downsizing your home or selling off assets you don’t need. Even if you do have disposable income, finding ways to increase the numbers in your bank account is always beneficial.
2. Create a budget and track it
Once you have all income streams and expenses listed, it’s time to create a budget and stick to it. It’s hard to tell how you spend your money without creating and monitoring a budget over time. After a couple of months, it will become evident how your spending your money and a clearer picture of how to manage it will come into focus.
3. Revise and pay (yourself)
Over and underestimations are common when you first begin budgeting but can arise at any time. As the budget ages, you’ll start to notice trends in your spending and see where you can cut costs to stretch your income and possibly, identify opportunities to increase your income through investments, savings or other means. Make the budget work for you, not against you.
Your divorce may have significantly trimmed your budget, but even if it’s only a few dollars here and there, earmark some money for savings each month. Put the extra money into savings until you have built up a reliable nest egg (most experts advise you to build up enough savings for a 3-month hiatus). Knowing that isn’t reasonable for every situation, make sure you have at least enough saved to cover an unexpected expense.
Lastly, put the extra money toward a little fun, because we all need to stay sane, and begin to invest in your future.