How to Budget for a Divorce

How to Budget for a Divorce

Divorce is a major life decision that can have a financial and emotional impact on both parties. Nearly 50% of first marriages in the United States end in divorce. The rate of divorce for second marriages is even higher. Any divorce requires the family court to issue a judgment of divorce and there is a cost to get there. Before filing for and moving forward with a divorce, it is important to acknowledge the challenges of divorce law and procedure and to be financially and emotionally prepared.

Among the many challenges of the substance of a divorce, the attendant costs are a significant issue. In New Jersey, the average cost of a divorce is around $12,500, which includes legal fees, court costs, and other expenses, including, but not limited to, financial and custody experts. Generally, the more complex and contentious a divorce is, the higher the cost. Our attorneys can help you learn how to budget for a divorce.

Preparing Financially for a Divorce

The cost of divorce can vary depending on the complexity of the and how busy the Court is. Budgeting for your divorce is one of the proactive ways to manage and reduce the inherent financial burdens of divorce and life after divorce.

Here are some ways to do so:

Start Analyzing Your Income

It is best to have at least two or three years’ worth of tax returns, W-2s, and 1099s– or even up to five years for medium to long-term marriages – so you can analyze exactly how much income you had as a couple and individually. Recent paystubs and benefit statements are also vital to analyze your current income, tax withholdings, and deductions for things like insurance. You should also gather other financial documentation, such as bank account statements, retirement account statements, investment account statements, mortgage statements, credit statements, and personal loan statements. These documents will help you determine exactly what your assets and debts are worth and how much you spend on living expenses. Your divorce attorney can help you perform these analyses.

Variable and Fixed-Income

As you analyze your past spending, it is important to categorize your spending or expenses into two different categories: variable and fixed. This will further demonstrate how much money you need to maintain your lifestyle after your divorce, and the categories in which you can potentially be flexible when it comes to spending. Your divorce attorney can also help you do this.

Anticipate Future Expenses

Knowing your household expenses can help build your budget for maintaining your lifestyle expenses. This also helps when an attorney or judge analyzes and calculates alimony or child support. Try not to make major purchases during the divorce procedure so you can be prepared for any unexpected expenses, especially if the divorce becomes contentious. Ask your attorney if you are unsure about a particular purchase. It is also helpful to do some research on what future expenses may actually cost after the divorce. For example, if you are covered under your spouse’s health insurance policy, you should consult with your own HR department or go on the Health Marketplace to see how much your own health insurance will cost because you will lose your spouse’s coverage under most employer-provided plans when you are divorced.

Know When to Ask for Help

If your divorce is amicable, it is easier to deal with the financial implications. That said, having a financial advisor or a trusted attorney can help when it comes to financial planning.

Moving Forward After Divorce

By working with a divorce lawyer from day one, you can better protect your rights and future during the dissolution of your marriage. If you are going through the divorce process, let an experienced attorney advocate for a fair share on your behalf. The skilled legal team at Moskowitz Law Group can thoroughly review your divorce case and fight for the amount you deserve. Contact our office today.

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