A post divorce budget is one of the most critical pieces of information to have when determining the financial divorce settlement. I have seen budgets created where one party only lists the expenses that he/she is currently paying for during the separation. This most certainly is not the case post divorce. Car insurance, cell phone, medical insurance, rent/mortgage expense, accounting fees, religious dues are just a few examples that may add or reduce your ongoing budget post divorce. How can future financial security be determined if the information to make decisions is incomplete? Will the settlement work? Do I need to cut expenses? Do I need to find additional sources of income? What maintenance is needed to support the life style post divorce, what happens when support ends, how is the payor’s gross reduced by support paid due to tax savings? The post divorce budget is as important for the non-financial/low wage earner as well as the higher income earner.
I worked on a Collaborative Divorce case where the husband, a very high wage earner, was adamant about not preparing a post divorce budget. He was of the impression that this will somehow speed the process. However, this tended to slow down the process towards the endgame. The wife, wanted to know how support will affect her soon to be ex, is she being reasonable in her request, or should more be needed. The husband later felt “no one is looking at my financial picture” and then additional time was taken time to determine his financial needs. This was far into the modeling of different financial settlement outcomes which then had to be reworked.
The husband felt he was giving adequate support to the wife to carry her through to retirement. The wife felt that she needed more in assets to cover her for a longer period of time. The husband’s response was “you will get remarried.” This is not a financial solution. The wife felt that once support was ended, his net worth would continue to rise. This is absolutely true once all the financial obligations have ended for the husband. However, just as the wife may remarry, should the husband remarry, he may have additional future financial obligations. These emotional issues must be tackled, and the financial resolution be built on today’s known issues so that both parties feel the resolution is equitable.
I can’t stress the importance of the wife and husband to both have a voice in the process, expressing their concerns and needs while the financial modeling is being done so that at the time of the settlement agreement all anxiety about the final resolution has been heard and addressed.