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How to Create a Post-Divorce Budget

If you’re going through a divorce, money may be a concern. How will you get by without financial input from your ex-spouse? How will you support yourself and your children? These are valid concerns for a newly single person that make it all the more important to create and stick to a post-divorce budget.

Budgeting for your post-divorce life

After the ink on your divorce settlement has dried, your financial situation may change drastically. You might find yourself with extra money, but that’s a best-case scenario. Many divorcing couples are faced with a reduced income and financial reserve. Here are some of the problems that typically weigh people down when the divorce process concludes.

Paying off divorce debt

Maybe you took out a loan to help pay your divorce lawyer. Maybe you charged more expenses to a credit card than usual. To pay down divorce-related debt, you may need to cut your current spending and put any extra cash toward these debts.

New expenses

Maybe you purchased a new home or car after your divorce proceedings. You now have mortgage payments or car payments you didn’t have before. Maybe you rented a place and now have that monthly expense. On top of that, you must pay for things like health insurance, utilities, and groceries on your own. These are items you must factor into your post-divorce budget.

Reduced income

This is a big one after divorce. Instead of a two-income household, you’re a one-income household. And with only one income, your standard of living may change. You may need to cut back on certain expenses.

If your income has reduced post-divorce, you will need to make adjustments to your budget. You may need to change your spending habits or find ways to bring in more cash flow.

Creating a post-divorce budget

Step one: Look at your income

The first step is to look at your post-divorce income. This may be from your job, child support, spousal support, or other sources. Once you know exactly how much money you're bringing in each month, you can start to budget for your expenses.

Also, it’s smart to keep in mind how often you get paid. If you get paid every Friday, for example, you'll want to calculate how much of that paycheck should go immediately toward bills.

Step two: List your expenses

The next step is to list all of your post-divorce expenses. These may include:

  • Mortgage payments or monthly rent
  • Car payments or other transportation fees
  • Food and groceries
  • Insurance
  • Debt payments
  • Childcare or child support payments
  • Spousal support payments
  • Clothing and personal care items

And don't forget about your other monthly expenses, such as:

  • Phone bill
  • Internet service
  • Cable or streaming services
  • Gym membership
  • Other subscriptions

It's important to list everything. We suggest creating a spreadsheet using Google Sheets or Microsoft Excel to help you organize and automatically calculate your monthly expenses. This is a vital step to help prevent overspending.

Recommended reading: 10 Financial Mistakes to Avoid When Getting a Divorce

Step three: Consider your necessities (needs)

After you have listed all of your post-divorce expenses, evaluate what is a “need” and what is a “want.” Your needs are items that you cannot go without, such as housing, transportation, food, and insurance. These are the must-haves in your post-divorce budget. While you may be able to reduce them by switching services or only buying items on sale or with coupons, they are expenses you probably cannot completely eliminate.

Step four: Factor in the extras (wants)

Your wants are items that you can live without but would make your post-divorce life more comfortable. This may include items such as clothing, entertainment, and dining out.

You will need to decide which of these items are must-haves and which ones you can live without. For example, if you love going out to eat but know you can't afford it, you may need to find a cheaper alternative, such as cooking at home.

The key is to be honest with yourself about your post-divorce lifestyle and what you can afford. Just because you had certain items before doesn't mean you need them now. It also doesn't mean that you'll never have them again.

Step five: Subtract your monthly costs from your monthly income

After you have determined your monthly income and expenses, figure out if you're overspending. To do this, simply subtract your total monthly expenses from your total monthly income. If you're using a spreadsheet, you can set a formula to do this automatically.

If the number is positive, that means you have money left over each month. If the number is negative, that means you're overspending and need to make adjustments.

Step six: Adjust your post-divorce budget

If you find that you're overspending each month, don't panic. This is common after divorce. You may need to make adjustments to your post-divorce budget to get back on track. 

Some adjustments you may need to make include:

  • Finding more sources of income
  • Reducing your spending
  • Cutting out unnecessary expenses
  • Prioritizing your expenses

If you're struggling to make ends meet, there are financial planning resources that can help you. For example, you can speak with a financial advisor or counselor to help you get your post-divorce finances back on track.

Step seven: Monitor your transactions to stay on target

After you have created your post-divorce budget, it's important to stay on track. This may require some tweaking along the way. As your income or expenses change, you will need to update your budget accordingly.

It's also a good idea to review your budget periodically to see if there are any changes you could make. For example, you may be able to save money by switching to a cheaper phone plan or cutting out a subscription service.

By tracking your post-divorce budget, you can stay on track and make smart financial decisions. This will help you in the long run as you transition to your new life.

As you create your post-divorce budget, prepare to make some tough decisions. You may need to cut out frequent dinners with friends, choose just one streaming service (instead of five), and hold off on large purchases until you get your financial footing. After a few months, you may be able to start adjusting items and expenses to afford more items from your “want” list.

Get professional guidance

If you feel overwhelmed by the thought of creating a post-divorce budget, don't worry. You don't have to do it alone. There are professionals who can help you get your finances in order. A financial planner can help you create a budget that fits your post-divorce lifestyle. They can also provide advice on how to adjust your budget as your circumstances change.

Hello Divorce provides flat-rate sessions with a certified divorce financial analyst (CDFA). To learn about our CDFA service, click here. If you have questions and want to speak with one of our associates, you can schedule a one-on-one 15-minute phone conversation here. We look forward to meeting you and helping you start your next exciting chapter with your financial goals in check.