Divorce is one of the hardest emotional experiences a person can go through. It can also be just as challenging financially, since your income and expenses may change significantly. The last thing you may want to do now is make a budget, but an honest look at your finances could be exactly what you need. When you know what you can afford, you can better plan for your future.
Here are a few tips for budgeting so you can build a healthier financial life post-divorce:
Adjust For Less Income
There’s no way around it: one person makes less income than two. Whereas before, you included your spouse’s income in your budget, now all expenses must be paid for from what you alone earn (not counting any spousal or child support you may receive from your ex-partner). This means your budget may need adjustments.
Think Hard About Housing
One of the biggest shocks after a divorce has to do with the home you shared. Most divorcing couples either sell the house and split the proceeds, or have one spouse pay the other in cash or assets so that they can keep the house. As tempting as it is to want the comfort of your home at a turbulent time in your life, a house that was affordable with two incomes may become unaffordable on one. If you have to spend more than 30 percent of your gross income on the monthly mortgage payment, you may want to consider other housing options. Be honest with yourself about how much home you can afford now and downsize if necessary.
Crack Down on Expenses
Just as your income changes when you’re newly single, so can your expenses. Do an honest accounting of everything you pay for in a month. If it doesn’t match your new single income, look at what non-essential expenses you can cut out. You may have to eat fewer dinners out or lose one of your subscription services to balance your budget.
Adjust, Adjust, Adjust
Remember, a budget is a living document. You have the power to rewrite your income and expenses. If you’re feeling the crunch, now may be the time to hunt for a better-paying job and boost your income. One thing is certain: you can’t live your post-divorce life on your pre-divorce budget. Now is the time to lay out your new reality and adjust as your circumstances change.
From budgeting for today, to saving for the future, the experts at BayCoast Bank are here to support you. Contact us today!