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Budgeting after Divorce - Purposeful Wealth Advisors

Budgeting for a Single-Income Household

Budgeting after Divorce

Transitioning your finances to be on your own can be a challenging aspect after divorce. Whether you are in a situation where you have plenty of income or where things will be tight, adapting to a new budget will provide you with valuable insight that will serve as a strong financial foundation after your divorce. At Purposeful Wealth Advisors, we understand the unique challenges you face and are here to guide you through this transition.

Understanding Your New Financial Landscape

The first step in creating a sustainable single-income budget is to gain a clear understanding of your new financial situation. This involves:

  1. Assessing Your Income: Calculate your total monthly income, including salary, spousal support, child support (if applicable), and any other sources of regular income.
  2. Listing All Expenses: Create a comprehensive list of all your monthly expenses, including housing, utilities, groceries, transportation, insurance, and debt payments.
  3. Identifying Financial Obligations: Take note of any new financial responsibilities resulting from your divorce settlement, such as paying off shared debts or maintaining life insurance policies.

Strategies for Effective Budgeting

1. Use an App

We really like the Monarch Money app. You can link your checking and credit card accounts so you can view your spending over the past several months. The app will allow you to get a sense of the amounts you have been spending and then you can then set a budget. The app will automatically assign expenses to a budget category (though you should set aside some time each week to make sure everything is categorized correctly). The app will provide you with ongoing information about how you are spending your money. 

2. Prioritize Essential Expenses

When adjusting to a single income, it’s crucial to distinguish between needs and wants. Focus on covering essential expenses first:

  • Housing costs (rent/mortgage, property taxes, insurance)
  • Utilities
  • Groceries
  • Transportation
  • Healthcare
  • Debt payments

3. Build an Emergency Fund

Having a financial safety net is crucial when you’re relying on a single income. Aim to save 3-6 months of living expenses in an easily accessible savings account.

4. Manage Debt Wisely

If you’re carrying debt, develop a strategy to pay it down:

  • Prioritize high-interest debt, such as credit card balances
  • Consider consolidating debts to potentially lower interest rates
  • Explore income-driven repayment plans for federal student loans

5. Plan for the Future

While immediate financial needs may seem pressing, don’t neglect long-term financial planning:

  • Continue contributing to retirement accounts, even if you need to reduce the amount temporarily
  • Review and adjust your investment strategy to align with your new financial situation
  • Consider purchasing term life insurance if you have dependents

Adjusting Your Lifestyle Mindset

Transitioning to a single-income household often requires a shift in mindset. It can be scary when the reality sinks in that you alone are in control of your finances. Though this can also be a very empowering time.

If you find yourself in a situation where you need to reduce your expenses, the following can be helpful.

  • Focus on experiences rather than material possessions
  • Embrace frugal living as an opportunity for creativity and personal growth
  • Involve children (if applicable) in budget discussions to teach valuable financial lessons

Remember, adapting a post-divorce budget is a process. Be patient with yourself and celebrate small victories along the way.

Work With Us

Navigating the financial aspects of divorce and adapting to a single-income household can be overwhelming, but you don’t have to face these challenges alone. At Purposeful Wealth Advisors, we specialize in helping individuals like you create sustainable financial plans that align with your new life circumstances and future goals.

Our team of experienced financial advisors is ready to work with you to develop a personalized budgeting strategy, optimize your financial resources, and build a clear financial future. Don’t let financial uncertainty hold you back from embracing this new chapter in your life. Contact Purposeful Wealth Advisors today to schedule a consultation and take the first step towards financial independence and well-being.

Disclosure:

Any opinions are those of Purposeful Wealth Advisors and not necessarily those Raymond James Financial Services, Inc., or of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Raymond James is not affiliated with Monarch Money.

Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.