This article is from Richard D. Soat, a San Antonio-based financial professional with BDO (a professional services firm providing assurance, tax, financial advisory and consulting services) and a board member of the Collaborative Law Institute of Texas. The opinions expressed on this site are Rick Soat’s own and do not necessarily represent the views of BDO USA, LLP.
One of the hardest things I have to do when I’m serving on a collaborative divorce team is to help people deal with the financial realities of divorce. People want to maintain the lifestyle that they’ve been accustomed to while they were married. When they look at income and expenses as newly-divorced people, and compare those figures to when they were married, there’s pushback that occurs, and understandably so.
While it can be quite a jolt to face the financial realities of divorce, it does often bring one big positive – it forces people to create a budget and follow it. When you’re not on a budget, you’re not as conscious about what you’re spending your money. Once you track how much you’re spending going out to eat, on coffee, or on shopping for clothes or gadgets, the numbers might surprise you.
When you’re first planning your divorce, in consideration of possible outcomes and how these will figure into your post-divorce finances, you want to make an honest assessment of how much money will be coming in. Then, you want to track your expenses, starting with the most important ones: your mortgage or rent payment, your car payment, insurance, your food, and your utilities. Then, you need to determine priorities for all the other categories, based on what’s left in your budget, as well as what you have in savings in case of emergencies.
Budgets are very good at telling you what is essential spending versus discretionary spending, and they help you to adapt and adjust to your financial situation. Of course, in order to be effective, you have to follow a budget. When you’re first starting out with a new budget, it’s helpful to track your spending to make sure you’re actually sticking to it, and how close you are to the spending limits you’ve set for yourself as the month progresses.
Divorce isn’t an easy process, especially when it comes with financial challenges on top of emotional ones. But a budget’s a first important step in getting in front of your finances. If you follow one, you can feel good about sticking with a plan that will help your long-term future as well as your short-term situation.