How to Handle Splitting Finances After a Separation
There is no easy way to go through a divorce, period. Even what could be considered an easy or simple divorce causes substantial physical, emotional, and financial stress. After all, you are leaving someone you cared about and are splitting up everything you shared during your time together — a lot of memories and emotions are coming to the forefront. Perhaps the most trying aspect of a divorce is the divvying up of finances and adjusting to your new financial reality. More often than not, this means a substantial amount of compromise with a person that may have recently hurt you. It may be difficult, but the more civil you and your ex-spouse are to each other, the more quickly and painlessly the entire process will go. So let’s talk about how you go about splitting finances after a separation.
Going into a divorce, nearly every expert will tell you that it is important to get a post-divorce budget in order as early as possible. Divorce generally requires reassessing one’s entire budget, and it often means fewer resources. Below are a few financial things to consider as you create your new budget.
Start Tracking Finances
One of the most valuable things you can do as soon as you know you are going to be getting a divorce is to track household finances. This information is important for lawyers and judges involved in your case to make a fair ruling on the splitting of assets and debts. It can also be a great way to begin building your post-divorce budget.
Start keeping an account of statements of income and bills for everything, including:
- Your and your spouse’s income
- Transportation expenses
- Entertainment purchases
The goal here isn’t to prove you have been doing the lion’s share of the financial lifting in the family, but to get a stronger idea of how much it costs to maintain your current lifestyle. Without two incomes, you may have to make some fairly significant adjustments.
Once you have an idea of your current income-to-expense ratio, start projecting out into the future. For instance, if you have children together, you may be paying for childcare now, but you’ll also eventually be paying for things like sports, car insurance, and college. These future expenses can impact how much money you will need to save over the years.
As soon as it becomes clear what your budget is going to look like, start transitioning into it. Adjusting early can help you to adapt and may free up additional funds that you can save for a rainy day. If you are on a particularly tight budget, start thinking about cutting certain expenses and finding ways to live without some of the unnecessary things you once considered essential.
One example of reducing expenses is to look at the vehicle that you’re driving. Are you currently making payments, or do you own your vehicle outright? How is the gas mileage? Are there alternative, cheaper sources of transportation available to you? Would you benefit from trading it in and converting to a used car?
Be aware that as long as you are married, all of your debt will be shared. Part of being civil during a divorce is not racking up a lot of debt that you and your ex-spouse will have to share. Doing so doesn’t really help anyone, and it can make the process that much more painful. The goal shouldn’t be to financially break each other.
Take Time for You
There is a very real possibility that being wrapped up in a divorce will eat all of your free time and consume all of your thoughts. Try to take a step back from that and focus on getting some quality “me” time. Even if you are the one who wanted the divorce, it can be surprising to discover that you may also need some time to heal yourself and recover from the process.
Sure, you may not be able to afford a beach vacation on your new budget. And the last thing you want to do is rack up a ton of unnecessary debt on a vacation. But if you do need to get away, there are ways of doing so that you don’t have to completely break the bank.
Considering visiting a friend of family member that lives out of town or going on a hike. Getting away from the situation for a long weekend can make a huge difference and give you a fresh perspective on life without costing a great deal. In your day-to-day life, think about taking up healthy things such as running outside or doing yoga in the park rather than going to the bar to drown sorrows.
No divorce is easy, but there are ways to help reduce the financial burden and prepare for the future. Begin by tracking monthly expenditures and working to build a post-divorce budget. This budget is likely to be smaller than you’re used to, so find ways to save some additional money. If the stress of going through a divorce is getting to you, take advantage of some cheaper ways to help reduce it.