Personal Finance

A Complete Step-by-Step Guide to Creating a Post-Divorce Budget

Here’s a step-by-step guide to start improving your financial well-being after separation and create your post-divorce budget.
Bruce Hodges
April 5, 2024
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Table of Contents

A Complete Step-by-Step Guide to Creating a Post-Divorce Budget 

Creating a post-divorce budget is crucial for managing your finances effectively and maintaining financial stability after a significant life change. 

By following these steps, you can create a comprehensive post-divorce budget that empowers you to take control of your finances and navigate this significant life transition with confidence. 

Remember to be patient and kind to yourself throughout this process, as adjusting to a new financial reality post-divorce will take time and effort.

How to Create a Post-Divorce Budget 

Step 1: Gather Financial Information

Before diving into creating your post-divorce budget, it's essential to gather all relevant financial information. This includes details about your sources of income. You want to list your salary, alimony, child support, rental income, and any other streams of revenue.

From here, take a look at your monthly expenses. You want to cover everything from housing costs and utilities to groceries, transportation, insurance premiums, and debt payments. 

Take stock of your assets, which could include savings, retirement accounts, investments, and property. You want to do the same for your liabilities. Things like mortgage, loans, and credit card debt should be listed. Don't forget to review your divorce decree and any related legal documents to fully understand your financial obligations and entitlements post-divorce.

Step 2: Assess Your Financial Goals and Priorities

With a clear understanding of your financial situation, you can now take some time to assess your financial goals and priorities post-divorce. Consider both short-term and long-term objectives. 

Short-term goals may include your immediate needs like: 

  • Paying off debt
  • Covering essential expenses
  • Establishing an emergency fund for unexpected costs

Long-term goals could encompass: 

  • Saving for retirement
  • Your children's education
  • Buying a home
  • Achieving other financial milestones 

Prioritize these goals based on their importance to you and your circumstances.

Step 3: Track Your Spending

To create an effective budget, it's crucial to have an accurate picture of your spending habits. Tracking your spending allows you to identify patterns and pinpoint areas where you may be overspending or where adjustments can be made to better align with your budgetary goals.

Step 4: Create a Budget

Now that you have a clear understanding of your financial situation, goals, and spending habits, it's time to create your post-divorce budget. 

  • Begin by listing all your sources of income and their respective amounts. 
  • Next, account for your fixed expenses, such as rent or mortgage, utilities, insurance premiums, and loan payments. 
  • Then, factor in variable expenses like groceries, transportation, dining out, and entertainment. Allocate a portion of your income towards savings goals, such as building an emergency fund or saving for retirement, and debt repayment. 
  • Finally, distribute the remaining income among discretionary expenses or additional savings, based on your priorities and financial objectives.

Take note of the big changes that may have occurred since your divorce or separation. Even little things like shared subscriptions will have an impact on your budget, which is why it’s crucial to outline everything.

Step 5: Set Realistic Limits and Adjustments

As you create your budget, it's essential to set realistic limits that align with your income and financial goals. Be honest with yourself about what you can afford and where you may need to make adjustments. 

Divorce and separation are big life changes, so be kind to yourself during this period. Life, goals, and financial means may look a little different for a period of time. It’s important to be realistic about what has changed, and allow yourself time to rebuild.

Step 6: Monitor and Adjust Regularly

Creating a budget is not a one-time task; it requires ongoing monitoring and adjustment. 

Regularly review your budget to track your progress and make any necessary tweaks. Update your budget to reflect changes in income, expenses, or financial goals as they arise. 

What If You’re Dealing with Debt?

Divorce often brings about significant financial changes, including the potential accumulation of debt. If you find yourself struggling to manage multiple debts acquired during or after your divorce, debt consolidation could be a viable solution to consider. 

Consolidating your debts can lead to lower monthly payments due to reduced interest rates or extended repayment terms. With lower monthly payments, you can free up more cash flow in your budget. This additional liquidity can be allocated towards essential expenses, savings, or rebuilding your financial stability post-divorce.

Learn how Parachute can help you improve your financial well-being post-divorce today! 

Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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