As Collaborative Divorce Professionals, one of the most common questions we are asked is this: Can I afford my life once my divorce is finalized? Will I be okay? And there is no one answer for everyone. With a Collaborative Divorce, your team will help you navigate these questions and more. A Change in Lifestyle It does not matter if you’re male or female, working or not working, have lots of assets or very little…divorce often leads to a change in lifestyle. You will have two households as well as the upfront expense of setting up those homes with furniture and household necessities. Childcare expenses could change if the stay-at-home parent suddenly has to go back to work. Your retirement accounts will be affected which means that you might need to change how you save. But before you panic, let’s take a look at the things you can take control of NOW in order to ensure better success down the road.
Understanding your Finances One of the most important aspects of the divorce process is developing an accurate budget and understanding your finances. Here’s what you can do:
- If you don’t have a budget, begin by looking at the bank and credit card statements for the last 6 months.
- Get a feel for the recurring expenses like car, mortgage and utility payments. Then make estimates of discretionary expenses like dining out and entertainment by averaging your spending over the past several months.
- Account for annual expenses such as car registration, life insurance payments, etc.
- Once the budget is determined and you understand your expenses, look at earned income, alimony and any other income to see if there is enough to cover your expenses. If not, then the budget will likely have to be adjusted.
After your divorce is final, it will be important to review your budget periodically and make sure you are living within your means. And remember that you’re not alone in the process; the Financial Neutral who will be a part of your Collaborative team is experienced in creating budgets and available to assist clients in developing a budget for their Divorce and post-divorce life. Divorce is a stepping stone into a new life. It is important for people to have a game plan so that they can transition into their new independent financial life with success.
Sandi Gumeson is a Certified Public Accountant (CPA) licensed in California and a Certified Divorce Financial Analyst (CDFA). She has 20 years of extensive experience in financial analysis, forensic accounting, and financial management. She has been practicing in the divorce niche since 2011 and is passionate about helping her clients understand the financial intricacies of divorce. For more information please visit her website at www.wellspringdivorce.com.