Many of us have limited funds and survive paycheck to paycheck so discussing an emergency fund at this point is premature; someday you will need to work it into your plan, but for now, you need to come to terms with your financial situation after divorce. The way money is spent will need to be re-evaluated. For you to stay in control of your finances, you need to create a monthly budget. Monthly budgets tend to be pretty consistent, so they make a good planning tool.
Start by writing down the monthly income you can trust. Income such as child support could create problems if not received promptly so add it later as a “bonus.” Next, write down your monthly bills beginning with your monthly bills that don’t change, for example.
- House payment
- Car payment
- Credit card payments
- Child care
Then include your monthly expenses that vary such as food, gas, utilities and other miscellaneous expenses.
Once you have your income and expenses add each category and see where you stand; it is very unlikely these totals will be equal. If you have more income, great! Put some money into a savings account. However, a lot of the time you will find that your expenses exceed your income and in this type of situation, you need to make some hard decisions. The first thing that you can do is to go over your expenses with a fine tooth comb and try to lower your expenses by implementing some changes like canceling cable Television, buying generic food items, purchasing one Starbucks coffee per week instead of 5, and so on. Focus on meeting the expenses that put a roof over your head, food in your stomach and help you keep your job.
All this work is for nothing if you don’t follow your budget. Of course, unexpected expenses will occur; however, your budget is useless unless you follow it closely. Since this financial situation is new, you may need to tweak your budget for the first few months to improve its accuracy.
Here is a resource called Money Matters created by the FDIC which offers tips, tools, and resources on developing a reasonable budget.