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.
 

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.
     
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.
     
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.
  • Compare your children’s budget to the National Averages here http://www.cnpp.usda.gov
  • 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.
     

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

This checklist was created by Justin Reckers, CFP®, CDFA™, AIF®

Justin is a Managing Director of Pacific Divorce Management; a San Diego based firm specializing in the financial aspects that arise for couples going through a divorce. Justin has developed a passion for guiding people through what can be the most emotionally and financially devastating period in their life. He provides education and support during difficult decision making processes in order to facilitate rational and informed conclusions for clients. Justin also serves as a Financial Planner for Pacific Wealth Management, LLC, a San Diego-based investment management, consulting, and financial planning company where he specializes in comprehensive financial planning. His practice includes a comprehensive post divorce financial planning program for clients dedicated to preparing for financial independence and long term success during the post divorce transition. This program was developed with his Family Law experience in mind having seen the negative effects of lack of follow through.

For more information on Justin Reckers or to get in contact with him, go to his homepage: www.pacdivorce.com