Divorce: Building a New Budget

After a divorce, your financial situation will probably be very different than before the divorce. Take some time to get familiar with your new situation. A new budget is the first step in adapting to your new financial circumstances.

Get organized. Make copies of all important paperwork to come from the settlement and put them somewhere safe.

Create a budget by writing down your expenses to find out where your money is going. Pull out your credit card bills and bank statements from past years as guides to your spending habits. Then estimate how much your new bills will be. Be sure to include expenses for entertainment, clothing and other major spending categories. Include some money for savings. It may take several months to fine-tune your budget.

Now estimate your monthly income. Don't include potential income - only income you are sure to receive. Alimony and child support may be included but only if you are confident that your spouse will pay for them.

Check your budgeted expenses against your income. Do you have more going out than you have coming in? If so, you need to cut expenses. Entertainment bills are easier to trim than fixed costs such as utilities and housing. Keep trimming until you have enough income to cover your expenses. It may hurt at first, but settling into your new financial situation is critical to long-term financial fitness.

The last step is to take whatever proceeds there may be from your divorce settlement and invest them. If you have lost insurance coverage, replace that as soon as you can. Then start saving for your retirement.