This is a guest post by Denisa Tova.
This is probably the most important piece of your divorce process...to figure out what it’s going to cost you to live on when you split one household into two.
Start with a reasonable post-divorce budget. The goal is to get a realistic idea of your living expenses as you start negotiating with your spouse about balancing out your incomes.
Eventually, your spousal support will end, and then you’ll have to figure out how to pay your bills without it.
The sooner you join reality and live within your new budget, the better prepared you’ll be for the future.
Budgeting After Divorce
Here are a few major areas in your forward-looking budget to do your homework:
If you’re trying to decide whether you can afford to keep the marital home, this is the perfect place to start.
If you have a mortgage that is currently in both of your names, you’ll need to see whether you can qualify for a re-fi in your name only – and if so, whether you can afford to keep the home.
Contact a mortgage lender to find out if you qualify to obtain a mortgage in your name and get a quote for a house payment.
Tip: your housing expenses (including utilities, taxes and insurance) should not exceed 40 percent of total monthly gross income. That’s the figure you’ll have to plug into your budget.
2.) Medical Expenses
Look at your medical history.
Do you have any chronic conditions, whether from disease or the slow and irrevocable process of aging? How many times do you visit your doctor annually?
Will you have the same coverage post-divorce that you have now? What are your co-pays, and how many prescription drugs do you take?
Do the same for dental care. Your budget should plan for out-of-pocket cost of routine dental visits at least twice per year. Ditto for vision care.
Calculate your expenses and enter those that are not covered by your vision plan. Examples could include a new pair of glasses every two years, annual eye exam, and supplies.
If you or your children need (or have) orthodontia or get allergy shots, those are considered extraordinary medical expenses, and sharing such expenses needs to be covered in your divorce agreement.
Car payments: If your vehicle is ten years and older, you’ll either have to replace it or substantially increase your car maintenance budget.
There’s no good choice here – either way, you’ll have to suck it up.
This figure should include a set of new tires every two years, quarterly oil changes, etc.
4.) Children’s Expenses
And for your kiddos, don’t forget to add the extras!
- For infants – special clothing, diapers, special foods, well-baby medical visits, more expensive daycare and babysitting.
- For toddlers – full-time daycare, immunizations.
- For school-aged children – school supplies, school trips and activities, school clothing, lessons, activity fees, special clothing and equipment, organizational fees and costs.
- For teenagers – car and car insurance, cell phone, advanced lessons and clinics, more expensive activity fees, special clothing and shoes, and graduation expenses.
- Gifted and talented – additional costs.
- Special needs kids (handicapped, developmentally or educationally delayed, ill, injured, or emotionally troubled) – additional costs.
- Extraordinary medical expenses – orthodontia, dental treatment, dental cleaning, eye exams and glasses, counseling, chiropractic, etc.
5.) Extra-curricular activities:
How will decisions be made with respect to extra-curricular activities and extraordinary medical expenses?
In other words, who decides whether little Susie spends the afternoon at soccer practice or at her piano lessons? And who pays?
Here are a few options:
- Each parent contributes a set amount into a joint account that is used solely for agreed upon
- Children’s expenses.
- Parents keep a jointly-owned credit card open and charge agreed upon expenses on it
- Each parent is responsible for an amount proportionate to his/her income.
So there you have it: 5 things to consider when creating your post-divorce budget.
Create a budget so you won't have to worry about the financial problems afterward.
Denisa Tova is a Certified Financial Planner and a Certified Divorce Financial Analyst, Investment Advisor and a former on-air Financial Analyst for Fox TV News. For close to two decades she has helped hundreds of men, women, and couples with her unique set of skills sets to divorce smart and rebuild financially after divorce.