Focus on the Future: Budgeting After Divorce

Most of our divorce mediation clients know that I love budgets.  I even require that they complete budgets as part of their divorce process so that financial decisions not only feel fair but are actually feasible for everyone.  Surprisingly, very few couples have ever created a budget, so this is often their first exposure to budgeting.  Once the budgets are complete and the divorce final, however, how many actually use the helpful tools in moving forward in their single lives?  

Understandably, it is normal to feel anxious or stressed about budgeting after a divorce, but there are steps to take and resources to use to make budgeting a little more palatable. Nyelah Mitchell, Affordable Mediation’s newest Intern, has put together some thoughts and tips to help you budget.

Step 1: Mindset 

To start, you have to become comfortable reviewing your income and how much you spend. Yes, when you pay attention to your spending it can be eye opening and uncomfortable, but it is important to keep in mind that it gets easier the more you interact with your finances. 

Next, remind yourself that budgeting is a process. It can take a few times until you create a budget that works perfectly with your needs. Therefore, it is important to be patient and open minded. Lastly, it is helpful to view budgeting as a forward-looking process. In other words, consider how your spending habits today will impact you in the future.  

Step 2: Organization 

When you create a budget it is important to list your assets. The list below is simply an example of possible assets, as they depend on each individual’s situation. 

Your household items: 

  • Rent/Mortgage 
  • Real estate taxes
  • Local taxes
  • Homeowner’s or Renter’s Insurance 
  • Utilities (electric, gas, water, garbage)
  • Yard/Pool maintenance
  • Home maintenance/repair
  • HOA dues
  • House Cleaning services 

Your transportation costs: 

  • Car payments 
  • Car insurance 
  • Registration
  • Gas 
  • Car repairs
  • Parking 

Your personal costs: 

  • Bank fees
  • Non-covered medical expenses
  • Groceries 
  • Toiletries 
  • Entertainment 
  • Eating out
  • Streaming services
  • Contributions to savings or retirement
  • Pet costs
  • Credit card fees
  • Loans

Your child’s costs (if applicable): 

  • Day care 
  • Baby sitters 
  • Clothing/School uniform 
  • School activities 
  • School supplies 
  • Medical (dentist and doctors)
  • Extracurricular activities

In addition to listing assets, you must have an organization system for future revisions such as a spreadsheet or a budgeting app. Using a spreadsheet or budgeting app can help you keep track of your spending, income, and savings. Budgeting apps, in particular, offer options to track debt payments and net worth as well. 

Once you have a good understanding of your assets, then list your income. Based on your assets and incoming income, you set the amount of money you will spend on each category one month at a time. 

Step 3: Consistency 

If you think creating a budget is a challenge, wait until you have to stick with one! When trying to stick to a budget, it is best to take time before making any big purchases. Also, recognize when you cannot afford something and take shortcuts if you need to, perhaps you have too many subscriptions or you often eat out. 

In summary, creating and sticking to a budget can be a challenge.  That is okay, everyone goes through it. What matters is that you take steps to change how you view your finances.