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More often than not, the standard of living of both spouses drops in the first few years after divorce. Why? Because the same cumulative income and pool of assets now has to support two households instead of one. Unfortunately, most people don’t prepare themselves financially or emotionally for that consequence. So what can you do to better prepare yourself for this inevitability? The answer is simple, but it’s not easy to put into practice.
Divorce is an inherently stressful process. To alleviate some of the stress, it’s important to be proactive and in control. Here are the “Lucky Seven” things you can do to help prepare yourself financially for your post-divorce future.
You should expect your income to drop after the divorce is final. Develop a budget based on needs– not wants – and keep in mind that your expenses need to stay within your post-divorce income. Consider all sources of income – including spousal and child support, keeping in mind that they won’t last forever – as well as investment income. To develop a budget, use a detailed worksheet so you don’t overlook any expenses. The best sources for the expense information are check registers if that’s how you pay your bills, bill statements, credit card statements and reading the expenses list on my expense sheet I mention below. Remember that not all your expenses are paid monthly; some insurance premiums or tax bills might be payable quarterly or annually, so make sure to account for those as well. To help get you started, email me and request my “Monthly/Annual Expenses” worksheets, at Karen.firstname.lastname@example.org. I suggest first filling out an expense sheet listing your entire household expenses during marriage and then filling out a second expense sheet listing the post divorce expenses you expect to have on your own. I also suggest filling these out in rough draft form using pencil before typing them into a computer.
The last step in preparing a budget is to ask a reasonable and critical friend or family member to review your budget and challenge the expenses that seem unreasonable. You have to agree to keep an open mind and not to get mad if he/she challenges one of your items; remember that this person is trying to help you.
Stay tuned for next week’s article for number 2 of the “Lucky Seven”
I am a certified divorce financial analyst with clients from all over San Diego. I specialize in working with attorneys, mediators, individuals and couples, helping them navigate through the morass of the divorce process. My expertise lies in understanding the special tax and financial issues that can plague divorce and I work to help clients attain financially fair and equitable settlements. I strive to help clients avoid having long-term regret over decisions made during the divorce process and my goal is for clients to be successful in the new phase of their life.
After my own experience with divorce & the loss of my father a short time later, both emotional and financial fears set in. I had become unmoored from the life I knew and was now in a circumstance that created uncertainty. While paralysis in the face of challenge can be common, it can also be debilitating. I had a desire for the comfort that comes with clarity of action but was unsure what to do. I believe it is imperative clients focus on what they have and how to best utilize their resources instead of focusing on how their life used to be. Once they do so they often realize that although life may be different than it was before, it can often be even better.
I present to groups and am the founder of “Women and Wealth” workshops held in Rancho Santa Fe and Santa Barbara. Although I work in an often stressful field I manage to find time to decompress while enjoying my hobbies of traveling, surfing, golfing, dancing and volunteering with the San Diego Nice Guys. One of my long standing loves is my equestrian hobby.