Figuring out your family’s finances is a project most couples don’t look forward to during the divorce process. Often, when one of the spouses decides to move out of the house, it pushes the financial envelope, so to speak, because the couple, if they’re fiscally responsible, needs to know how much it’s going to cost to maintain two households instead of one. The goal is that neither spouse straps themselves financially.
The figure a couple comes up with after an analysis of their finances can be a big reality check. Given how much of an impact a family’s overall financial picture can have on other aspects of divorce including spousal maintenance (alimony), child support, and child custody, it’s important to get these numbers right before moving out rather than afterward.
To fully understand the family’s financial situation before moving out, it means first assessing and documenting income, then creating a budget. This is how to get started.
Determine your income together and separately
The first step you should take is to assess the amount of income you and your spouse each bring in every month. If you or your spouse are salaried employees, this should be pretty straightforward. If however, one or both of you, own businesses or work solely or partially on commission, determining your income can present more of a challenge, potentially requiring the assistance of a forensic accountant.
Income from retirement, trusts, government benefits, royalties, and any other sources unrelated to employment should be accounted for as well. Having access to this information is often easier while living under one roof, so keep your eagle eyes open.
More than that, I cannot stress this enough: document, document, document. Make photocopies, take screenshots, take photos on your smartphone. Then put what you find in a safe place where your soon-to-be-ex (or hackers) can’t get a hold of it. If you need to, be discreet as you conduct your research. Even if you are on good terms presently with your ex, be understated in your investigations anyway. Nobody likes to feel as though they’re being watched, and the sensation of it is often enough to change people’s attitudes from cooperative to secretive.
So what documents should you be amassing? For the salaried employee, tax returns for at least three years with all schedules (better if you can do five) and paystubs. For those who are self-employed, bank accounts, credit card statements, business records, and credit lines.
The more you can find, especially where there’s a family business, the better. Those are the situations that tend to get the murkiest.
Formulate a budget
Once you assess and document your household income, the last step toward assessing your financial situation is to put together a budget. That budget should include the income, as well as what the expenses (including any debt payments that may exist) will be for the departing spouse once they move out.
Be meticulous in your inclusion of expenditures. Think rent, mortgage payment if the spouse is making a purchase, property taxes, utilities, groceries, car payment, traveling expenses to and from the marital home if they will have child visitation, and anything else the spouse who is moving will need to support themselves separately and apart from the current household.
Keep in mind your budget can extend beyond basic necessities to those pastimes and expenditures that make you happy, and that you enjoyed before (though maybe not in the same amount), like eating out, going on vacation, hobbies, and grooming appointments. Your life pre-divorce is, to some degree, will be a determinant of how much money you will have to work with for your post-divorce budget. Just because you’re leaving, doesn’t mean you can’t have a nice life after you do. Isn’t that the whole point?
The work you do now to document your financial picture and create a detailed and accurate budget will be well worth your time and effort. Even if your research creates added stress for you today, by not pushing it off to a time when collecting documents and making calculations will be more difficult, you’re protecting yourself from more stress tomorrow.