Divorce and Budgeting—The 4-1-1
By Alyson Falk
In recent years, I’ve had some very meaningful experiences with clients, women and men, who had to learn how to budget—both to get through their divorce cases, and then to plan for their lives on the other side of their divorces. What I’ve learned working with them through this process can help you as you’re considering ending your marriage and moving forward with a necessary divorce. Your key takeaway—budgeting for and during divorce is not the same as any other budgeting!
Before you file…
If you happen upon this article before you file your divorce case, or before your spouse files and serves you with divorce papers, read this!
- Do you have bank accounts in your sole name?
In divorce, everything you earn and spend will be discoverable by your spouse, but it is important for you to have an account in your own name where you can be in control of some of your money. If you don’t currently have a checking account and a savings account in your sole name, go open them.
- Do you have credit cards in your sole name?
This is not for a shopping spree. Access to credit can be vital in some divorces. While dipping into credit is not a healthy, long-term financial plan, it may be necessary for you to use credit to pay for your expenses during divorce. If you don’t currently have a credit card in your sole name, find a credit account with a reasonable interest rate and apply.
- Do you have access to money to consult with or hire an attorney?
Whether and when you consult with an attorney is confidential. In many cases, clients are worried about what will happen if their spouse learns they’ve consulted with an attorney about divorce. If you are going to meet with a lawyer, but only have access to a credit or debit card you share with your spouse, you may want to make arrangements with a friend or family member to pay the expense for you so that you can have privacy as you evaluate this path.
What spending looks like during divorce…
In most urban Texas counties, when your divorce is filed, you will be under a Standing Order issued by the Courts in your county. The Standing Order will generally prohibit you from spending your money on anything that is not “reasonable and necessary.”
- What are your essential expenses?
When you start working with a lawyer, you will be asked to complete a budget. This is not a budget of your preferred spending under normal, non-divorce circumstances. Rather, this is a budget of your essential expenses. The Court needs to know what you (and your children, if you have them) cost per month.
- You can’t always get what you want.
If you and your spouse are arguing about money, then you can expect your expenses to be scrutinized at some point during your divorce. As I mentioned above, everything you spend will be discoverable by your spouse during your divorce, so keep that in mind when you are spending money where perhaps you shouldn’t be. Focus on meeting your needs with the money you have access to now. You can take care of your wants when you’re on the other side of this.
- What if you don’t have money for an attorney?
Remember “reasonable and necessary” expenses, above? Attorney fees are reasonable and necessary expenses, so you are specifically authorized to spend money on your lawyer. Unless you have a prenup that says otherwise, all of the money (and credit) you earn during your marriage is community asset and can be used to pay your reasonable and necessary expenses.
Your budget after divorce…
Going into your settlement negotiation or contested final trial, you need to know what your post-divorce budget looks like. It’s difficult, if not impossible, to evaluate your financial settlement options without knowing for yourself what you really need from your settlement or final trial.
- Where will you live and how much does THAT cost?
When we are married, happily or otherwise, if we are not the spouse paying the bills, we often forget just how much the roof over our head costs. It is not just a mortgage payment. If you will be owning a home, or want to, remember we pay property taxes here in Texas. For most of our Central Texas clients, those property taxes are steep and you will need to plan for that big payment at the end of each year.
- Getting your own accounts.
Being on the other side of your divorce means that you will have your own insurance policies, cell phone plan, health insurance policy, etc. Don’t be a bystander in this part of your divorce. Contact every provider and get a quote for everything you need so that you can plug it in to your post-divorce budget. Knowledge is power. You don’t want to be blindsided by your essential expenses while you’re enjoying the new life you’re creating on the other side of your divorce.
- You CAN save later.
For many of us, divorce is a financial punch in the gut. However, you can recover financially if you focus on your budget. There are different schools of thought on how to budget, but I am partial to the 50/30/20 method of budgeting. Find the budgeting method that speaks to you and dedicate yourself to saving for a rainy day, your dream home, or a getaway (when it’s safe for us to travel)!
How does all this relate to your divorce? Discuss your options and come up with a game plan for your unique needs with an Austin divorce attorney.