David’s Divorce Dictionary:M is for Money
Definition: In divorce, the word money means “something of which there is not enough.”
Based on my observations, the typical middle-class family of four in eastern Massachusetts spends around $135,000 per year, after taxes, on a basic family budget:
- Mortgage or Rent is about $30,000 per year;
- Utilities and Heat are about $5,100 per year;
- Cable TV and Internet cost about $2,100 per year;
- Groceries and house supplies are about $15,000 per year;
- Car payments and insurance are about $10,800 per year;
- Gasoline and car maintenance about $4,200 per year;
- Cell phone expense is about $2,400 per year;
- Home repairs (roof, paint, plumbing, appliances) about $3,000 per year;
- Health Insurance and Life Insurance about $7,200 per year;
- Children’s clothing, sports fees and lessons about $9,600 per year;
- Christmas, Hanukkah and birthday gifts about $4,200 per year;
- Uninsured medical, dental, and orthodontia is about $8,400 per year;
- Daycare, after-school programs, babysitting is about $5,200 per year;
- Spending money/misc for the children costs about $4,200 per year;
- Family vacation/travel costs about $7,500 per year;
- Weekend entertainment and dining out costs about $5,000 per year;
- Credit card interest costs about $1,200 per year;
- Restaurant & Entertainment expense about $9,000 per year;
- Wine/Liquor/Weed/Cigarette expense is about $3,600 per year; and
- Retirement savings/401(k) averages about $7,500 per year.
This catalog of common expenses doesn’t account for summer camps, tutoring, teenage auto insurance upcharges, student loan debts, private school and college costs, and a host of other cash drains which we all confront. That’s a lot of money to come up with after your paycheck is gutted by income taxes, Social Security, and Medicare expenses.
When divorce happens financial challenges double. The same family income which supported one household must now be stretched to support two.
Distressing Sacrifices Usually Have to be Made
There is no easy way to make sufficient money appear. People may find that a well-loved home must be sold; one spouse may move in with a family member or rent substandard housing; 401(k) contributions must stop; funds from savings and retirement accounts might need to be spent down; family vacations, dining out, gym memberships, and private education give way to putting food on the table; home and car repairs get deferred; and stay-at-home or part-time-working parents re-enter an often challenging workforce. People may need to borrow from family or seek help from friends. Some families find themselves applying for food stamps, free school lunches, or subsidized health insurance. It may be necessary to take a second job to make ends meet.
Is there anything that can be done?
The answer is to be realistic, practical, humble, and prepared.
The Post-Divorce Budget
Preparing a comprehensive post-divorce budget is a crucial exercise in planning for post-divorce financial realities. It is fundamental to settling cases responsibly—to making informed, reasonable decisions about support, asset division, meeting the needs of children, keeping the marital home, and paying for college. Unless one creates a detailed post-divorce budget, settlement decisions are made in a financial vacuum.
Divorce professionals should work with clients on post-divorce budgeting to prevent them from experiencing post-divorce sticker shock. It will avoid post-divorce pain for the client, and for the professional.
So what’s included?
The post-divorce budget is a detailed listing of all of one’s anticipated income and expenses after the divorce. This includes figuring out the bite that taxes and medical insurance costs will take out of one’s paycheck. This includes laying out the full costs of housing. This includes projecting expenses like day care if a stay-at-home parent will now need to work; and braces if a child will require them; the cost of replacing a car that is on its last leg; fixing a roof that is leaking; saving for college expenses appearing on the horizon; and considering taken-for-granted expenditures like weekly wine, gym membership, health and beauty aid expenses; hair and nail-care; streaming service costs (Netflix, Apple Music, Amazon Prime, HBO Go) and monthly counseling fees.
What’s the Takeaway? When doubling down on the financial settlement in a divorce, begin by building up a realistic and thorough post-divorce budget. Do not leave home without it.
If you have any questions or comments about this article or suggestions for future topics, please feel free to contact me.