7 Steps to Building Your Post-Divorce Budget

You could be in the position to splurge on a sexy, sporty sedan to celebrate your divorce. On the flip side, the loss of your spouse’s income contribution to the household could be greater than your drop in expenses.

Either way, a post-divorce budget will let you know where you stand with your finances, help you avoid getting whacked with surprise expenditures, and keep you on a steady course of financial stability.

If your former spouse was the family budgeter, don’t panic. Developing a budget doesn’t require a huge time commitment, and you don’t need an advanced degree in finance or accounting to develop one.

This straightforward process to create, manage, and follow a budget will help you thrive post-divorce. Here’s how:

List your current income and expenses. You can keep it simple and go old school here. Just grab some paper and a pencil, draw a line down the middle and on the left list all your income streams, such as your job, alimony, child support, and investment income. On the right side, list your expenses: rent/mortgage, insurance, auto loans, utilities, credit card debt, food, education, commuting costs…whatever you can think of that you spend money on each month. Don’t worry if you can’t think of everything; you’ll refine your income and expenses after tracking them over time.
Tally everything up. If you have more income than expenses, that can feel like a relief, although keep in mind you may be forgetting an expense (or three!) On the other hand, your expense column may be higher than your income. Either way, refrain from celebration or panic, as you’ll have a better grasp on your spending habits in the coming weeks and months. In the meantime…
Start tracking. Tracking income and expenses gives you firm handle on where your money comes from and where it goes. Yes, it can feel persnickety especially if you’re not used to watching your earning and spending that closely, but the insights you’ll gain will be invaluable. You can keep it simple by writing things down in a notebook, or print a copy of our Fritter Finder worksheet to help you find where your money fritters away.
Get creative. If your expenses exceed your income, think about ways you can increase your income and decrease expenses. For example, if you’re employed as a graphic artist and your employer allows it, you could do some freelance design work to boost your cash flow. Or look around where you’re living…could you downsize and save on housing costs? Sell hobby equipment you’re no longer using? Likewise, if you’ve got some extra income, instead of indulging in the flashy car, you could increase your 401k contribution at work, add to your emergency savings, or pay off high-interest credit card debt.
Draw up a budget, keep it visible and most important…follow it! You’ll soon start seeing patterns in how you spend your money, so set monthly targets for your spending that align with your financial goals. For example, your expense tracking may shock you when you see how much you spend on take-out lunches at work; you can reduce your budget as you get used to brown-bagging lunches. Keep your budget somewhere where you’ll see it: your smartphone, posted to your refrigerator, or tucked into your wallet.
Revise as necessary. Don’t give up if you can’t seem to meet your budget. Maybe you underestimated how much you spend on fuel for your car and overestimated clothing expenses. Go ahead and make adjustments. The goal is to create a realistic budget that works for you, not punishes you.
Pay yourself first. Even if you can only afford a few dollars each week, earmark some of your budget for savings, especially if you don’t have ready cash available for an emergency.