New life, new budget: A divorcee’s survival guide

Posted by Hakyun Morrissey.
“Friday was always Italian night.” Deborah, a petite brunette in her forties, was reviewing her monthly grocery budget—and it looked almost the same as before she got divorced.
“It was a kind of weekly tradition, a chance to talk about our week. Plus a splash of romance.” Deborah was struggling—not just emotionally but financially—and that’s why I’d scheduled our meeting.
It was time to rethink her spending, and come up with a solid post-divorce budget—the first step towards a bright financial future.
She still cooked spaghetti on Fridays, except now she ended the night with Netflix and a refrigerator full of leftovers that would never get eaten.
“It’s hard for me to justify spending so much on ingredients,” she confessed. Even harder was the idea of giving up her Friday night ritual—the scent of simmering garlic, that first sip of fine red wine…
Meals for one aren’t the only lonely conundrum that newly divorced women like Deborah face. She was making little adjustments everywhere—yet somehow couldn’t make ends meet.
By taking a step back and reviewing her overall spending, to the last dollar, I helped Deborah reclaim control of her finances—and her life. The task seemed daunting at first, but it all boiled down to answering three basic questions. What does she need? What does she want? Who can she become?
Accepting your new financial reality
Once your divorce is finalized, your first step should be a warts-and-all inventory of how much monthly income you expect to receive going forward. You may have mixed feelings including panic or anger but the sooner you accept your new financial situation, the better it will be for your long-term wealth and well-being. If your ex-spouse has been ordered to pay you alimony, how much? Does it take the form of regular payments? If you got a lump sum, you need to lock heads with your financial advisor in order to come up with a strategy for managing that money. You may be earning a salary, or receiving income from investments or Social Security. Add everything up so that you’ve got a concrete number to work with. Next, the three fundamental questions.
1) What you need:  Picking out “must-haves”
Deborah’s $30 bottle of Malbec had remained a weekly treat, a “nice-to-have” rather than a “must-have.” We reviewed her bank statement from the previous month to see what else she was spending money on, and with a highlighter pick out the bare-bones must-haves. You may decide, like Deborah, to use a budget worksheet to jot down your essential expenses—including that monthly grocery bill.
As you go down the list of essential budget items, there may be expenses you hadn’t even thought of—perhaps your spouse paid the electricity and cable bills. If you were the one ordered to pay alimony or child support, include that amount as “Miscellaneous.”  Another miscellaneous expense I suggested for Deborah was therapy. A paid counselor could help her work through her feelings of grief, betrayal and resentment. In my eyes, this was every bit as essential as financial counseling.
Deborah never had to worry about health insurance premiums while she was married because she was on her husband’s work plan. Fortunately, her current employer had a group health plan, although bi-weekly premiums were $150—much more than she expected. However, it wasn’t a good idea to dilly-dally. Enrollment periods are strict, and you generally have only 60 days from the date of your divorce (a triggering life event) to apply for COBRA or coverage through your employer.
Don’t forget savings
When you have two incomes coming in, everything is shared. This marital property is called “community property” in some states, meaning it’s split 50/50 during a divorce. But when you’re actually married to someone, you don’t contribute everything 50/50—one spouse usually earns more than the other, maybe one puts more (or all) into the shared savings pot.
As part of her divorce settlement, Deborah was awarded a share of her husband’s retirement fund—but this only covered contributions that he made while they were married. In other words, she would need to continue saving for retirement on her own. She decided to defer just enough of her salary (5%) to get a full employer match in her work 403(b)—she could always increase it later. A lot of budget worksheets don’t include a savings section, so you’ll need to budget for retirement and emergency-fund savings under “Miscellaneous.”
The tricky part: Deciding what to cut
Do you really need that $50 per month cable subscription? Or stay living in such a big house? What feels safe now may not be serving your longer-term interests. Take your home, for example. It’s important for you to stay there, especially if you have kids. You want them to feel stable and cause minimal disruption in their lives. However, it may make more financial sense to sell the house and move elsewhere. Imagine all of you living somewhere else a year from now, settled and secure. Have a discussion with your kids about how great it would be to live in a new place.
2) What you want: Tightening your “nice-to-have” belt
Picture yourself a year from now. A single, self-confident woman, dressed from head to toe in designer gear, perhaps sipping a cocktail in a swanky bar? Or perhaps a shabby-chic first-time novelist, roaming the Continent for inspiration? You may be feeling raw right now and will do anything to make yourself feel better, including fantasies about your future. Visualizing your ideal future and rebuilding your confidence are a good start—but you don’t need to max out your credit card in the process. Many new divorcees take an expensive trip or replace their entire wardrobe as a way to reset their lives. However, you can kick start your life while living within your means. Before listing your “nice-to-have” expenses, try to view any planned trips or restaurant meals from the vantage point of your future self. Will it seem like money well spent? In the aftermath of divorce, we often purchase things that offer a short-term emotional payoff at the expense of long-term security. Ultimately, you want to keep discretionary spending to a minimum because your savings rate (see Step 3) could always use an increase.
“We tend to overestimate the value that shiny new possessions will add to our lives.”
Obviously, you deserve to indulge in some discretionary spending as you try to move on and start over. And there are financially smart ways to press that reset button. Avoid credit cards unless your FICO score has taken a beating and you need to rebuild it—in which case, use a credit card regularly and pay off the balance in full each month.
Go shopping with a strict budget in mind, rather than deciding how much to spend while you’re trying on the pair of shoes. Otherwise, you’ll see a few pairs costing $400 and convince yourself that $200 is a reasonable price—a bargain, even! A nice pair of heels can do wonders for your confidence—in the short term. We tend to overestimate the value that shiny new possessions will add to our lives. We make post-purchase rationalizations, convincing ourselves it was worth it—rather than admit to ourselves that we’ve blown our budget. Taking conscious steps to spend less will leave you more money to stash away for your future. Everyone loves a mani/pedi, but you can do your own nails while you’re getting a handle on your new budget. Nice-to-have designer eyeliner can be replaced with a cheaper product, using the exact same ingredients.
3) Who you can become: Knowing your financial worth
Once you’ve done all you can to cut back on your spending, you may need to look at ways to maximize your pay—either because your outgoings still exceed your income, or—as in Deborah’s case—to bump up your savings rate and feelings of security. Deborah worked as an HR manager at a university and felt lucky to have a job she loved. While she was married, she was never really proactive about getting raises or promotions. Always ready to champion her coworkers, she wasn’t so good at promoting herself. And although her annual reviews were glowing, she never thought about using that feedback to push for a raise. Asking for more money made her uncomfortable—she’d actively turned down promotions in the past. Now that she was the sole breadwinner in her household, she would have to rethink the way she approached annual and quarterly conversations with her boss.
This requires another kind of budget: I suggested that Deborah come up with a list of what she was giving to her organization—basically a list of her duties and what she’d accomplished out of scope. It turned out to be a long list. Alongside it, she listed what they were giving to her—compensation and employee benefits. The task then was to balance the two out, as she’d done with her income/expenses budget worksheet.
The longer you remain in a job, a sort of “responsibilities creep” takes place, where you gradually take on more and more work (and your value to your company rises). More often than not, your pay won’t have been adjusted to reflect this. If you find yourself in this position, consider requesting a pay increase. Rooting the conversation in facts and numbers means you won’t resort to emotional arguments, which can backfire. The key thing is demonstrating how your work has positively impacted your team and that you’d love the opportunity to give more of yourself. Your boss will have their own budget to grapple with and the funding might not be there right away—it may take some months for your boss to advocate for you, and that’s why quarterly reviews are a good idea.
A post-divorce budget is unlike the one you had gotten used to while married. You don’t need to get it right immediately—think of it as the first draft of a novel, a work in progress, in need of continual fine-tuning.
The reality of divorce was very different from what Deborah expected. Like “retiree,” “divorcee” is one of those roles that other people inhabit—it was hard to ever imagine herself in that position—until suddenly she was one. But it’s like any new role. Once you overcome the initial panic, you wonder why you ever doubted yourself!
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November 7, 2018
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