Post Divorce Money Plan

The Post-Divorce Money Plan

Now that you’re in charge of the finances, it’s time to get things in order. Believe me, it’s actually easier to manage the household cash when there’s only one person spending it – even though it is tougher to manage without that extra income.

A lot of women coming off a divorce feel really insecure about money – I know I did, even though I’m a financial professional. All of a sudden, everything is on your shoulders, and the weight feels overwhelming. But getting it all under control feels like a victory – and the first step toward that is making a money plan…a budget.

But you can take heart in this: According to a new survey of CPA financial planners, women do a better job of straightening out their finances after divorce than men. In fact, the survey found that post-divorce, women were

  • 4 times more likely to improve spending habits
  • twice as likely to increase retirement savings
  • 14 times as likely to get help from a financial advisor

And that all starts with you, and knowing the truth about your financial situation right now.

Knowing how much money you have coming in and how much you need to cover all of the bills is half the battle. Even if your outgo is initially more than your income – which can be a really upsetting situation – knowing that will help you get a better handle on it sooner. We only really get into deep financial trouble when we don’t know what’s going on with our money. So let’s take a breath, gather up some numbers, and make a money plan.

To create your plan, you’ll need to pull some numbers together to get a clear picture of your income and expenses. It’s also really important to take some time and think about your financial goals in concrete, measurable terms: I want to save $40,000 for my son’s college education within 8 years (for example). Make sure that some of your financial goals are for YOU, not just kid-centered ones.

Take these steps to create your plan

Start with an honest look at the money you have coming in every month:

  • Your monthly net pay, the actual amount of your paycheck after taxes and other deductions
  • Any alimony or child support you receive – if you can’t count on this money, don’t include it in your budget
  • Income you receive from any other sources, such as interest or dividends from investments, rental income, and so on

Next, add up your monthly expenses. Look back at your checkbook, bank statement, and credit card statements to make sure you don’t leave anything out. Remember to add in occasional expenses, like car insurance premiums and school supplies – just divide the total you spend on each by 12 to come up with a monthly number. And, equally important, include some unbudgeted “free” money – a little cash that you can use for whatever you want.

The third step in constructing your budget involves your financial goals. You’ll want to include some money for emergency savings here, along with amounts to go toward college funds and your future finances (like retirement savings). Even if you can only spare small amounts for these savings, put in a budget line for each – every dollar you save is a dollar closer to your goals.

Finally, subtract your total monthly expenses and savings goals from your total monthly income. If the result turns out positive, you have room in your budget for more saving or spending. If the result ends up negative, don’t worry – this is what happens most of the time with a first-draft budget. That just means your budget needs another go-around, with more attention on reducing expenses – or increasing income – where you can.

If you’re really struggling to piece together your budget, think about getting some professional help. It can make all the difference in getting control of your finances, or feeling out of control about them.

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