Okay, now that you’re divorced, you might want to celebrate with a nice sports car or a revision of your closet. However, the loss of your spouse’s income might leave you in the red when it comes to your expenses. In order to stay afloat after the divorce, you need to come up with a solid post-divorce budget. Luckily, this doesn’t require a lot of time or special skills. Here’s a straightforward way you can create a budget that will allow you to live your best life after the divorce.
Be aware of your income and expenses
First, put all your income sources and expenses on paper. You can do this old-school by grabbing a notebook and a pen, drawing a line down the middle of the page and put all your income streams on one (paycheck, alimony, investment income, child support, etc.) and expenses on the other (mortgage, loans, utilities, debt, food, education, transport, etc.) This list doesn’t have to be 100% correct—you’ll refine your income and expenses as you go.
Start tracking income and expenses
For a few following months, track all your income and expenses to a dollar. This will allow you to get a firm grasp of your financial situation and where your money comes from/where it goes. This activity feels very unnatural and awkward to some, especially people who are not used to watching their finances closely, but you’ll gain a lot of information through this habit. For this, use an old-school method or get an app that tracks your finances.
Set money aside for professionals
In organized countries like Australia, it’s best to do everything concerning your divorce through a professional, just to avoid disputes and legal loopholes. However, lawyers and other professionals cost, so make sure to include them in your expenses. Luckily, if you find honest family lawyers in Sydney can help you with the asset divide without wasting money, time and other resources. If you want everything to be over quickly and smoothly, professionals are a necessary expense.
Figure out the house situation
In most cases, exes choose to divide a home in one of two ways: one spouse stays in the house with kids and buys off the other party, or you sell the house and split the proceeds. While keeping the house might seem attractive, it’s often not the smartest financial move since having a house won’t pay the bills. If you decide to sell, but can only sell at a loss, you also have options: rent the house to your spouse or a third party until the market improves, sell at a loss and move on, announce bankruptcy or try “birdnesting”
Boost your savings
If you know you will soon start struggling financially, you might want to do your best to lower your expenses so you have enough money to survive until the settlement or in general. Create a list of unnecessary expenses—these might seem small individually, but can add up over time. You might want to temporarily give up streaming service, premium channels, home phone, eating out, magazine and newspaper subscriptions, cosmetic salons, take-out meals, Starbucks and so on. With these little changes, you will be able to save up to $3000 in just one year. When your financial situation improves, you can go back to your old spending habits and live a life just like before the divorce, but make sure to give up these expenses for now.
Get creative with money sources
Another way to improve your financial situation is to come up with creative ways to boost your income. There are many ways you can get extra work and extra bucks. For instance, if you’re in creative work, you can do some freelance stuff outside of your work hours to improve your cash flow (if your employer allows it). Maybe you can sell some of the items that you’re not using any more like hobby equipment. To save on housing costs, you might want to consider downsizing as well. Also, if you have some extra money today, this doesn’t mean that the situation won’t change soon, so don’t spend on a new car or new wardrobe, but try to increase your 401k, contribute to your emergency savings or pay off debts.
Look into Council Tax reductions
In many places (England, Wales, Scotland, etc.) if you’re the only adult living in a house, you can get a 25% discount on your Council Tax. This discount is also available if you live with a full-time adult student, a live-in carer or a person with a severe mental disability. People who are on a low income can also get a reduction, they just have to apply to their local council. Learn about these benefits and make sure to apply to improve your post-divorce budget.
No matter your financial situation today, smart budgeting after your divorce will get you more familiar with your finances, help you avoid unexpected expenses and keep you living comfortably (or at least get you on a way towards financial stability).