How do I figure out how to live on less money after the divorce?

Finding ways to stretch the family dollar is often the most difficult task in adjusting to life post divorce. Here is the start of a guide for beginning the process of adjusting to a new cash flow reality.

Create a budget with the goal of achieving the following results.

1. Detail all income and expenses

• Determine your net disposable income from employment, support and any other sources.
• Get your checkbook register, checking account statement and credit card receipts.
• Categorize your expenses into home, food, entertainment, etc. on a monthly basis.
• Create a separate budget for child related expenses
• Categorize your expenses between Fixed and Discretionary.
• Determine your Total Spending.

2. Create guidelines for your spending in each category. Remember these are just guidelines. If you treat them like rules you must follow you will miss the benefit associated with realizing you have made a positive change.

3. Create a snapshot of your financial world.

• Compare your Net Disposable Income to your Total Spending.
• Once you have the first snapshot of your income and expenses you can begin planning to make changes.
• Decide what constitutes a realistic budget.

a) Compare your children’s budget to the National Averages here http://www.cnpp.usda.gov/Publications/CRC/crc2008.pdf

b) Determine your debt to income ratio by determining what percentage of your monthly income goes to paying debts. If it exceeds 28%; consider trying to reduce your debt load.

• Find where you can cut discretionary expenses. Discretionary expenses include entertainment and dining out and offer the best source of budget cuts.

It will be helpful, even necessary for some folks, to work through this process with a Financial Planner. You are not alone in your dread for budgeting. Humans are built with the evolutionary skew towards surviving today at the expense of tomorrow.

Justin A. Reckers can be reached at:

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Tags: Divorce Financial Planning, Financial Life After Divorce, Justin Reckers, Pacific Divorce Management, Post divorce financial planning, post divorce wealth management

This entry was posted on Monday, March 1st, 2010 at 3:23 pm and is filed under Budgeting, Debt, Divorce Financial Planning, Post divorce financial planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.