How much do we spend each month?

It may easy enough, but preparing a budget in divorce proceedings, or when even just contemplating a separation or divorce can seem next to impossible.  When I first meet with a new client, I give them one of the most heinous forms know to man (and woman)- the Case Information Statement.  is a form that is required by the courts in NJ in most instances when there is a request for support or equitable distribution.  Part D of the form is a budget that is divided into three parts: Shelter, Transportation, and Personal. I tell my clients to take time to complete the form, as it may be one of the most important documents in their case.  A court will use the form to set support obligations which are based on the lifestyle of the marriage. The form is certified to, and it can be fodder for cross examination by the other side if not accurate.

There are actually two budgets that a client has to create in a divorce case. The first is the budget that the parties lived during the marriage,  the “current lifestyle” portion.  It is often difficult to come up with this, even though a litigant has had a long term marriage. Oftentimes, people do not realize how much they spend each month.  While the mortgage and car payment lines are easy, the others, not so much.  For example, the form asks a litigant to differentiate between “groceries and household supplies” and “sundries and non- prescription drugs.”  That’s sure to bring out the deer in the headlight look to even the most organized!

There are practical ways to recreate a realistic budget which represents how the parties lived during the marriage.  Luckily for divorce lawyers, credits cards and debit cards are widely used many purchases and bills are automatically debited from their checking accounts or charged to credit card accounts.  This captures the vast majority of purchases.  Obtaining bank and credit card account statements for the past 18 months (usually the longest time period an account holder can get statements online, or without a cost) can be extremely helpful.  Some credit cards, such as American Express, provide a yearly compilation of charges which are categorized.  This can be extremely helpful when creating a budget based on past practices.Also, litigants who use excel or Quicken on a monthly basis will find this to be invaluable.

Certainly there will be estimates on some categories.  However, it is important to be careful to estimate reasonably. It’s always a problem (at least for one side) when a budget totals $15,000 per month, but the available income from all sources is only $10,000.

The other budget that is important, particularly for the spouse seeking support, is that of the projected budget. What is it going to cost you to live after the divorce?  This can be much harder because you don’t know how much you will have, you don’t necessarily know where you will live, and you don’t know how much it will cost.  This is where the skills of organization and preparation are most important.  A well versed attorney,  can give parameters of what to reasonably expect.  Then, possibly with the help of an accountant or financial planner, a litigant needs to determine what net amount of income he or she will likely have each month.  Then, creating a budget will be easier. Finding the costs of rentals in the projected area of residence, or likely mortgage and tax payments are critical as in most cases, shelter expenses is a significant portion of one’s budget.  Is your car paid off? Yes, how old is it. Don’t forget to add in a payment if you expect to have to buy a new one within the next few years.  These are questions to be considered when determining reasonable needs moving forward.