by Laura Nash, CFP
Going through a divorce during COVID was not easy. There was a lot to disentangle, especially finances, after being married so many years. Like many people, my number one concern was having a positive cash flow, not only after the divorce but 5, 10 or 20 years in the future. Would I have enough to live on? Do I want the house and, if not, where will I live and what will it cost? Can I maintain my lifestyle? So many questions and at first – so few answers.
Once I knew we were getting a divorce, I began to prepare a detailed budget. Although I was aware of approximately what we spent on a monthly basis, I knew my life and expenses were going to be very different, especially since I had my high school-age son on a half-time basis. A detailed budget provided a more specific account of all my current and future anticipated expenses. It was helpful to look at my expenses in different ways. I found that viewing costs through a needs vs. wants lens was one of the best ways to get a better handle on my expenses. By separating my “needs,” i.e. the items I had to have, such as housing, food, utilities vs. “wants” such as new clothes, Netflix, hairdresser, I had a better understanding of a base of expenses needed to survive and the aspirational amounts that would allow me to continue my lifestyle.
Once I had a detailed budget, I needed to take a closer look at income and determine how I would pay for my expenses. Was I earning enough money to cover my expenses? How will we share the cost of continuing to support my son? These were a few of the questions I had to answer in order to develop a divorce settlement. For some, child and spousal support are two important components of future income following a divorce. A detailed budget is an essential part of the divorce negotiation that help justify future financial support.
The marital home is often one of the most divisive factors in a divorce. Determining who keeps the house or whether it is better to sell it and split the proceeds can be one of the most emotionally charged decisions a separating couple has to face. There are many factors that go into making this decision and a careful analysis of the pros and cons helps many people make a more educated and reasonable decision. For me, I was not emotionally attached to the house. Although it’s where we lived for most of our married life, and the place my kids call home, I was ready for a change and ready to let go of it. Moving out of the house meant I had other decisions to make, such as where would I live, would I buy or rent and then incorporating those costs into my budget. There was also the question of how would my ex-husband buy me out of the house so he could keep it. Luckily, we were able to negotiate an amicable arrangement.
Creating a more detailed look at my income and expenses provided the information I needed to analyze my cash flow. A better understanding of my cash flow helped me make a more rational decision regarding the marital home, as well as other assets. Systematically working through these tough financial decisions gave me peace of mind that I was making the best decisions for myself and my children. With financial confidence, I felt more positive embarking on the next exciting chapter of my life! If you find yourself facing a divorce, we understand how difficult it can be, and we are here to help you navigate those changes to your financial plan.