Avoid these 6 mistakes in your post-divorce spending plan

Have no idea what it will cost to live as a single person? Try building a post-divorce monthly spending plan. As you estimate expenses, be sure to avoid these six common mistakes.

Not estimating what your living expenses will be as a single person is a huge mistake. When a couple divorces, the same amount of income must be stretched to support two households, instead of one. This often means that some expenses will need to be decreased or cut out completely. Take control of your finances by building an accurate and realistic post-divorce monthly spending plan that factors in the costs of housing, transportation, food, medical, personal care, insurance, education, vacation, entertainment, gifts, children, and saving for the future.

As you build your spending plan, be sure to avoid these six common mistakes:

Mistake #1: Guessing what your expenses are.

Don’t guess! The best way to make an accurate and realistic post-divorce spending plan is to review the past several months of bank and credit card statements. Print out copies and review each line by line. In addition, check to see if your bank offers free online budgeting resources - many offer free tools to aggregate and categorize your spending information. Once you’ve reviewed your historical information, consider tracking your spending going forward. Keep a notebook and pen with you to jot down purchases you make throughout the day. If pen and paper isn’t your thing, look into budgeting apps like YNAB or Mint.

Mistake #2: Forgetting to account for seasonal expenses.

Don’t forget to factor in expenses that come seasonally. As you build your spending plan, mentally run through weather- and season-related expenses that you typically pay for. These expenses may include lawn mowing and landscaping, gutter clearing, adding and removing snow tires from your car, having holiday lights strung on your house, and snow plowing.

Mistake #3: Underestimating the amount spent on gifts and celebrations.

A common mistake we see is underestimating the amount spent on gifts and celebrations throughout the year. Use the following formula as a starting point for estimating the amount you spend annually on gifts:

(Number of people you by gifts for) X (Average cost of the gift) X (Number of times per year you give gifts)

For example, Leah regularly buys gifts for her parents and two kids, she spends about $100 per gift, and she gives each person a gift on their birthday and on Christmas.

4 x $100 x 2 = $800.

Add to this the amount you spend hosting holiday gatherings, birthday parties, graduation celebrations, and other special events throughout the year. Then, divide the total figure by 12 to get a monthly estimate.

Mistake #4: Underestimating the cost of a cell phone.

Are you on a family cell phone plan with your spouse? If so, it’s probably time to figure out the cost of your own plan. The cost of a standalone plan will likely be greater than your proportional share of the family plan.

Mistake #5: Underestimating the cost of auto insurance.

Like Mistake #4, many of our clients use their current auto insurance expense to estimate the cost of auto insurance as a single person. However, if you and your spouse are insured on the same auto insurance policy, it’s likely you receive a discount for having multiple cars insured on the same policy. Check with your current insurance carrier, as well as a few other carriers, to get an estimate for your own policy.

Breaking up the bundled insurance policy might also affect the cost of the homeowners insurance. If you plan to keep the house in your divorce, be sure to get an updated estimate for the cost of homeowners insurance.

Mistake #6: Failing to consider the future cost of services you currently get for free.

What services do you get for free now, that you may have to start paying for in the future?

If you’re keeping the home, and your spouse did a lot of the home maintenance and home repair, will you be taking on these responsibilities or hiring someone else to do them?

If Grandma watches the kids after school, what will happen if her schedule changes? Will you have to start paying for after-school childcare?

Start building your post-divorce spending plan today. Contact us to receive a free copy of the monthly spending template that we use with clients.

This information is educational in nature and should not be relied upon for legal or tax advice. Serene Divorce Planning LLC is not an attorney and does not provide legal or tax advice. Individuals seeking legal or tax advice should solicit the counsel of competent legal or tax professionals knowledgeable about the divorce laws in their own geographical areas. Serene Divorce Planning LLC does not sell or consult on securities.