Creating Budgets in the Divorce Process

In the traditional divorce process there is a lot of haggling back and forth about the amount of spousal support that will be paid. We take a different approach in the mediation and Collaborative Law context. In both of these processes we attempt to arrive at a meaningful support arrangement – one that compares need versus ability to pay and seeks to make sure everyone can pay their bills after the divorce. Budgets are instrumental in determining spousal support awards in both mediated and Collaborative divorces.

You have probably heard of budgets before although you may not have ever done one. In short, a budget is simply the total of all the money coming in and all the money going out. Here is a Monthly Budget Form for your convenience. Although this form is fairly comprehensive, you can certainly add to it.

Here are a few things to think about when you are preparing your budget:

Apples to apples budgets. It is important that both people use the same level of budget. They do not need to use the same amounts in their budget, but they do need to be including (or excluding) the same types of expenditures. For example, if one person includes a travel line item in their budget, then the other person should as well. If someone includes voluntary retirement in their budget, then so should the other person. However, the amounts don’t need to be the same. For example, it’s not unusual that one person has a much higher grooming budget than the other. The bottom line is that if someone is using a minimalistic budget, the other person should as well. If someone is using their preferred budget, so should the other person.

Exchange budgets before the meeting. You should exchange your budgets with each other before the meeting in which you will be addressing support. Neither person has veto power over the other person’s budget, but it is perfectly fair to comment on the other person’s budget. Often times people overlook or underestimate certain expenses; having the other person review your budget may help identify these things. Similarly, sometimes people overestimate costs and it fair to point that out as well. The purpose of exchanging budgets before the meeting is so that both people can offer feedback prior to the meeting. You want to go into the meeting with both people satisfied that the other person’s budget is reasonable. Two hour appointments aren’t cheap – you don’t want to spend the meeting arguing about budgets! Instead, you should come into the meeting having already reviewed and commented on the other person’s budget so that you can spend your time actually discussing support rather than arguing about whether someone should have included lawn service in their budget.

One-time expenses. Expenses such as your mortgage or cell phone are easy to identify. What are more difficult are one-time expenses. For example, you only need new tires every three or four years, but when you do they may cost $600 to $800. Similarly, Christmas only comes around once per year, but if you don’t budget for it you could end up with a huge credit card bill. It’s therefore important to think about these one time or irregular expenditures when preparing your budget.

Use post-divorce budgets. Many times people are still living together while they go through the divorce process and don’t have any idea how much life will cost after the divorce. Although this is somewhat challenging, it is very important to try to accurately project what your budget will be after the divorce is final. For example, if you will be moving, try to figure out what part of town you are moving to and how large a place you are looking for. This will give you some idea about what your rent will be and it will also help you begin thinking about the total cost of your utilities. Sometimes people decide that it makes sense to create two budgets – one based on current expenses and one based on their expenses after they move out.

Budgets can be challenging – particularly if you are not used to doing one. However, they are very important in determining an appropriate support award. Since budgets usually take some time to figure out, you should probably start working on your budget sooner rather than later…you will be glad you did!