Most financial advisors agree that couples going through a divorce are worse off financially once the smoke clears. There are a number of reasons. Splitting the family home is costly. If one party remains in the home, the couple must absorb the current mortgage along with a monthly rent or mortgage for the spouse who left. Utility bills that were once consolidated must now be paid by each party, essentially doubling the cost. Insurance policies must be split, which increases rates for both parties.
Surprisingly, many divorcing couples fail to review their finances. As a result, they are often unprepared for how expensive it is to split up. With that in mind, we’ll offer a guide below for making sure you’re prepared for the cost and able to survive financially after parting ways with your spouse.
Write Down Your Sources Of Income
The first step is to note the sources of your income. Include all of them. If you are currently employed, write down the amount of your monthly salary or wages. If you run a home-based business, note the amount of revenue you generate during a typical month. You may also own rental properties that produce income, and investments that pay quarterly dividends and interest.
Write everything down. Detail how much money each income source brings in on a monthly basis. If taxes are not being taken out automatically, deduct them.
Itemize Your Monthly Expenses
Next, write down your monthly expenses. Make a note of each item and the amount you pay for that item each month.
Include utilities, such as gas, electricity, water, and trash collection. Be sure to list your phone (landline and cell), cable television, and internet access. If you have a gardener, lawn service, pool service, or pay a babysitter, write those expenses down, as well. If your children attend private school, note their tuition. Include your monthly mortgage payment or rent, car loan payments, credit card payments, fuel expense, insurance premiums, and groceries. Don’t forget the amount you spend on clothes and entertainment each month.
Having a complete list of your monthly expenses in front of you will give you a clear view of your outflows. Only then can you take the next step: reviewing whether you can do without some of them.
Identify Expenses That Can Be Cut
Go down your list of expenses, item by item, and consider whether any of them can be cut. You’re not deciding to cut them at this point. You’re merely identifying those you can do without. For example, are you currently paying for cable television? You can probably do without it if you find yourself in a financial pinch. Are you spending $300 or more each month on clothes? Chances are, you can get by just fine on less.
Money will likely be tight after your divorce. Being able to stretch your budget may become critical. One simple way to make your income last longer is to cut back on nonessential expenses.
Brainstorm Ways To Earn More Income
Look for opportunities to bring in additional money each month. There are lots of ways to do this, even if you’re currently working full-time. For example, do you have a skill you could offer to others on a freelance basis? You could do so during evenings and weekends while keeping your full-time job.
If you’re currently working part-time, ask your manager to increase your hours. You may even be able to go to full-time status, complete with health benefits and other perks you’re paying for on the side.
You can also rent out a room in your house. The rent can provide a healthy boost to your monthly income, making it easier to meet your expenses. In addition, having a roommate may be comforting after finalizing your divorce.
If you have items lying around your home that you don’t need, consider selling them. Depending on the item and its condition, you can sell it on eBay, CraigsList, or by having a yard sale.
Getting Started On The Right Foot
It is impossible to overstate the importance of being financially prepared for your divorce. Take steps today – before your divorce is final – to ensure you are able to survive. That will make it easier to get your life back on track. From setting up your own bank accounts and establishing your own credit to getting the insurance coverage you need, you’ll be in a much better position to get a fresh start on life.