Many families operate without clear budgets for everyday expenses. Divorce can change that. Having a clear financial picture of your budgets for divorce can help you navigate your finances before and after the divorce process. As well as your lifestyle even when you become single.
How Your Attorney Uses Budgets for Divorce
When you hire a divorce lawyer, they need to understand how your family has operated and what you will need in the future. Developing budgets for divorce can help your lawyers:
- Establish household expenses and the family’s standard of living
- Understand special expenses unique to your family situation
- Discover concealed assets when the income, expenses, and bank accounts don’t add up
- Predict post-divorce financial needs
Historical Family Accounting
This type of accounting looks back at the status quo for your family before the divorce started. It should include all the money coming into your household, including from:
- Wages or salary
- Disability or Veterans’ Benefits
- Child support from prior relationships
- Rental income from properties
- Trust or annuity payments
- Business dividends
- K1 payments
- Gifts from family
It should also reflect how that money was spent. Be sure to document:
- Mortgage or rent payments
- Utility costs
- Food and personal care expenses
- Car payments, title, insurance, and gas
- Medical costs
- Debt payments (including student loans and credit cards)
- Child-related expenses (i.e., extracurricular activities, tuition, tutoring, childcare, etc.)
- Luxury expenses (i.e., vacations, trips, nights out, designer clothing, etc.)
Post-Separation Expense Budget
Your historical budget documents what was. The post-separation expense budget describes what is (if you are already separated) or what you expect to be true in the future. It should include all the same items listed above and anticipated child support or spousal support from the divorce and property settlement payments. This budget may require some research to establish the likely rental and utility costs in your area if you aren’t already separated.
What to Do When Income and Expenses Do Not Balance
Divorce divides one household into two, and your family’s income is always stretched thinner post-separation than it was in your combined home. You may need to work with your attorney, accountant, Certified Divorce Financial Advisor (CDFA), or divorce coach to prioritize expenses and set realistic expectations about your life going forward. Establishing a realistic post-separation expense budget that reflects your needs during the divorce process can help your attorney build you a better cushion.
Child Support Add-ons Cover Child Care, Tuition, Extraordinary Medical Expenses
The Michigan Child Support Formula is designed to anticipate a child’s financial needs for housing, food, clothing, and everyday care. However, if your child has additional expenses, your attorney can use your budgets for divorce negotiations to share the cost of:
- Childcare expenses up to age 12
- Health, dental, and optical insurance
- Private school tuition
- Medical copays or special needs
- Extracurricular expenses
You and your spouse can also agree to split other child-related expenses such as summer camps, driver’s education, computers, musical instruments, and additional costs.
Spousal Support Helps You Keep Your Lifestyle
Not every divorce involves spousal support. However, if you have historically been a stay-at-home parent, homemaker, or relied on your spouse’s income to supplement your own, you may be entitled to financial help during and after the divorce. Your attorney can help you determine how much spousal support is fair and for how long, and advocate for support that enables you to transition to living independently.
Accounting for Attorney Fees in Your Divorce Budgets
Realistically, you should expect each side to spend thousands of dollars on attorney fees. The more complicated or hotly contested your divorce, the more expensive it will be. When you develop your budgets, be sure to consider from where that money will come. If you have limited access to resources compared to your spouse, your attorney may be able to file a motion for attorney fees to help you afford the assistance you need.
At Thacker Sleight, our experienced and thoughtful divorce attorneys take a practical approach to your financial needs in divorce. We can help you prepare budgets for divorce that account for your needs and your current lifestyle. We provide our clients exclusive, highly professional service that is sensitive to their unique situations. If you are considering a divorce or a legal separation, contact us at 616.888.3810 to schedule a consultation.