Budgeting After Divorce for Riding it Out Solo
Divorcing your spouse is akin to setting a metaphorical match to your finances. Everything you thought you knew about the monthly budget, your financial future—aflame. The stress of rebuilding your financial future is palpable.
Regardless of your income bracket or career status, divorce costs money, and unearths the financial groundwork of your life in ways you may not have expected. Budgeting, now, falls solely on you. Now that we’re all sufficiently alarmed (perhaps a bit panicked), let’s breathe and go over some post-divorce budgeting essentials to turn the financial chaos into a real, actionable plan.
If you’re new here, we’re Alimonia Life, a community here for you. We share stories of divorce, and tools to empower you, so you don’t feel so alone in all of this. Recommended read: Lessons on the Way to Onesome.
Post-Divorce Budgeting 101—Financial Analysis
First things first. Examine “ground zero” or exactly where your finances are right now. This “financial snapshot” will identify your existing financial health. Set a reasonable time frame (accountability, of course) and gather the important information to see your net worth as it is right now.
LIST OUT YOUR ASSETS (Assets = What you own.)
Essentially you want a list of the items you own, along with their values. It may seem like a lot of legwork, but you look at things differently when they are laid out before you in print. You may discover areas of excess that can be liquidated to settle a bill, for example.
Gather all of the paperwork that demonstrates your assets, the value you have (equity), and what you still owe, if anything. These files also help you to strategically stay “on top” of things as you set out to re-budget your future without your spouse. You can create a paper list, create a spreadsheet, or use a worksheet tool designed for net worth evaluation.
Cash/bank balances
Home
Vehicles
Retirement accounts
Investments
Furniture
Personal items
LIST OUT YOUR FINANCIAL LIABILITIES (Liabilities = What you owe.)
Once you’ve determined what you have, then detail the liabilities, or the balances of what you owe. This can get overwhelming, but panicking won’t fix anything. Remember that you are here in this moment being proactive. Remember that power and tap in. For now, you’re just collecting the data.
Mortgage
Car loan
Loan statements
Credit card balances
Medical bills
Student loans
Personal debts
Tax debts
Pre-made worksheets can be really helpful when evaluating your existing financial landscape. Search for “personal financial worksheet” like Fidelity’s Divorce Summary Worksheet, Michigan.gov’s Net Worth Worksheet, or Schwab’s Personal Net Worth Worksheet. Review all three for inspiration and create your own spreadsheet if you want a more personalized, editable baseline to work from.
Once you know the baseline—what do I have, what do I owe—you can determine your net worth (Total Assets - Total Liabilities = Net Worth), and use the information to shift the scales. Here’s where your post-divorce budget can start to take shape.
Net Worth Doesn’t Define You
Financial net worth does not equal personal self-worth.
Repeat that, again and again, until your financial status becomes a number, and not an indicator of your personal worth. Net worth is a numerical reflection not of you, but of your financial standing. These are not the same. Whether you have a high net worth, and multiple properties and vehicles to your name, or are floating in a negative net worth, you are still you.
You may find that financial groundwork, financial “shadow work” if you will, shakes loose some held trauma, or self-doubt. You may find it liberating or empowering. Regardless of the emotive response, understand that finances, numbers, budgeting can all bring those big emotions to the surface.
So, sit with that for a moment. Take a walk. Talk to a trusted friend whose budgeting skills you admire. Seek financial counseling. Keep a journal. Just remember that budgeting is a tool for your empowerment.
Setting a Budget After Divorce
Major life changes like a divorce often call for a fresh look at your budget. If you don’t have a budget, now is a good time to begin one. Your budget can be very simple (targeting a few key areas for improvement) or involve a complex spreadsheet and multi-layered goals. Decide what is best for you, and looking at your financial landscape (assets vs liabilities) is a start.
Now, what’s coming in and what’s going out? Net worth is about what you have and owe, but your budget tracks the day-to-day habits that shape that bigger picture. Begin by gathering your average monthly income. And your average monthly expenses. Going back a few months can help you get a clearer picture.
List all sources of income & monthly averages
List all monthly bills and financial obligations (estimates for things like groceries and gas)
Subtract the expense total from the income total to determine the cash flow surplus (or shortfall) you have each month. Free budgeting spreadsheets can help with a framework for a budget that works for you.
Free Budgeting Spreadsheets
Design your own with Google Worksheet templates. To access these: Open Google Sheets > Gallery > Search "Monthly budget"
Budget Plans That Work
Budgeting is formulaic—increasing income while reducing expenses—but it should also account for the unexpected. Most budgeting planners will tell you to develop a hands-off contingency fund to handle these unexpected events—the car breaks down, your oldest boy breaks a tooth and crowns aren’t covered under your insurance plan, etc.
For contingency (and post-divorce budgeting) the Dave Ramsey Budgeting plan is doable and easy to follow. Set aside the Contingency Fund first, then get to work on the Debt Snowball approach.
Post-Divorce Financial Next Steps
Once you have a good idea of what’s going in and out, you can make adjustments. Small adjustments may be easier to manage consistently, building financial confidence. Post-divorce budgeting doesn’t have to be overwhelming in a scary kind of way. It’s more a skill to learn and practice. One that reclaims your financial freedom while building a brighter future for yourself and your newly defined family structure.
We hope you’ve found some post-divorce budgeting essentials here, and find even more useful information on our blog to empower your financial future, and your healing journey. See Alimonia Life Blog.
Christina M. Ward