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Budgeting for Divorce: Why is it Important?

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Budgeting for Divorce: Why is it Important?

Budgeting for Divorce: Why is it Important?

by Van Den Heuvel Law Office

Most couples or families must budget for their major expenses each month, like housing or a vehicle payment. But when it comes to smaller expenses, like gas or your morning coffee, many people lack an accurate budget for these everyday items. Divorce can quickly change all that, making you very aware of the true costs of providing for yourself and/or your children. This is why one of the most important steps you can take to prepare for an impending divorce is to create budgets for your current and future financial needs.

How Creating Divorce Budgets Can Benefit You

No matter how unclear your financial picture currently is, it’s critical to share the information you do have with your divorce attorney or legal team. They can help you in many ways, including:

  • Provide information on the types of documents to gather.
  • Determine the family’s current standard of living and household expenses.
  • Identify any costs unique to your family that need to be accounted for in the divorce, such as the care of a disabled child.
  • Compare income, expenses, and account statements to uncover inconsistencies that could be related to concealed assets.
  • Help you prepare for and calculate your living expenses after the divorce.

Documents and Records Needed for Your Divorce Budget

While household budgets can vary greatly from one family to another, there are some common types of information that you should collect when creating your pre-divorce budget, beginning with all sources of income. These may include:

  • Salary or wages
  • Veterans’ benefits
  • Disability benefits
  • Income from rental properties
  • Business income
  • Child support payments
  • Payments from a trust or annuity
  • Large gifts from family

You’ll also need to gather records on all the regular and expected costs your family has, such as:

  • Rent or mortgage payments
  • Utility bills
  • Vehicle payments and insurance
  • Healthcare costs
  • Payments on debts such as credit cards or student loans
  • Childcare expenses
  • Personal care and food items
  • Discretionary expenses, like vacations, monthly subscriptions, or entertainment 

Planning a Post-Divorce Budget

The information sources listed above will help you create a budget of how your family has lived in the past, but this is often very different than the expenses and costs you’ll face after the divorce. You’ll need to consider new expenses and possibly make difficult decisions about your priorities and standard of living. Some of the post-divorce expenses that can have the biggest impact on your financial future include:

Housing Costs – When divorce splits one household into two, the costs of maintaining both households will inevitably be higher. You’ll need to know the average cost of rent and utilities in your area if you plan to move out of the family home, for example.

Child Support – For couples with children, child support payments may be required to help cover the cost of the child’s everyday needs, such as food and clothing. Michigan uses a formula for determining child support amounts, however, if your child has special expenses that are not covered by the standard formula, such as special medical needs or private school tuition, your attorney can help you account for these in the divorce settlement.

Spousal Support – Also known as alimony or spousal maintenance, spousal support is not awarded in all Michigan divorces. But when appropriate, it can be used to help one partner support themselves until they can transition to living independently.

Legal Fees – Both sides will likely face attorneys’ fees that need to be accounted for in the post-divorce budget. These costs depend on many things, but it is almost always less expensive to agree on a settlement without going to trial. If you and your former spouse simply cannot agree on a settlement or parenting plan, and a divorce trial seems like your best option, you’ll need to carefully consider the additional legal costs this will involve and what is in your own financial best interests.

Our Experienced Divorce Attorneys Can Help You Craft a Divorce Budget

Creating a budget for your current situation usually isn’t tough but trying to budget for a future that is still unknown is considerably more difficult. At the Van Den Heuvel Law Office, we’ve been guiding Michigan families through the divorce process for many years and can help you establish budgets for your pre-divorce and post-divorce needs. Reach out to us today to learn more about how we can help with your divorce or family law issues.

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