3 Warning Signs: Budgeting For Unexpected Expenses After Divorce

Navigating the financial landscape after a divorce can be especially challenging, particularly when unexpected expenses arise. Being prepared for these unforeseen costs is essential to maintaining financial stability during this transitional period.

In this article, I’ll highlight three blinking-red warning signs to watch for when budgeting for expenses after a divorce. Recognizing these indicators early on can enable you to take proactive steps to manage your finances effectively, avoid potential pitfalls, and secure a more stable future as you adjust to your new circumstances.

Underestimating Legal And Litigation Costs

A good number of people I work with are simply unaware of how expensive contested divorce cases in New York are, particularly in higher-cost areas like New York City. Good divorce attorneys in this area can be very expensive, often charging thousands of dollars per month, easily $3,000 to $5,000 (& perhaps significantly more in high income or high net worth cases).

Although it’s rare for divorce cases to go to trial, you’d do well to budget $30,000 to $50,000. Add to your divorce contested custody and contested financial issues, and you’re easily looking at twice that amount or more.

Be prepared for these expenses by setting aside a significant budget for legal fees. Understand that the combined household income will be stretched thin post-separation, and plan accordingly.

Adjusting To The Financial Realities Of Single Living

Once you separate, the financial support previously pooled into a single household must now support two separate households, drastically reducing any additional funds you’d otherwise have. Unexpected living expenses, not to mention rent, utilities, and transportation, can add up quickly and strain your budget.

You might need to consider moving to a more affordable location or even living with a roommate or relative temporarily to manage costs. For example, a family in Westchester might need to relocate to a less expensive area like Yonkers, despite the impact on lifestyle and convenience.

Conduct a thorough budget analysis with a financial planner, considering net income, potential maintenance, and child support obligations (or receipt of same). This will help you understand what areas and housing options are financially feasible.

Failing To Utilize Professional Financial Planning

Divorce often involves complex financial arrangements that require specialized knowledge beyond what a typical divorce attorney can provide. Decisions related to your divorce, such as asset division, maintenance, and child support, will significantly impact your financial future.

Determining whether to prioritize maintenance over child support, or how to divide assets optimally, can be challenging without professional advice. A Certified Divorce Financial Planner (CDFA) can provide you with tailored advice, ensuring that settlements are structured in your best financial interest.

It’s wise to hire a CDFA as early in the process as possible to assist with the complex financial planning you’ll have to do. They can help you negotiate the most beneficial mix of assets and support, considering long-term financial stability rather than just a straightforward 50/50 asset split.

Some Additional Tips

• Regular Financial Check-ins: Schedule regular check-ins with your financial planner and/or your attorney to reassess your budget and adjust for any changes in income or expenses.
• Emergency Fund: Establish an emergency fund as soon as possible to cover unexpected expenses unrelated to the divorce that might arise during or after the divorce process.

For more information on Unexpected Expenses After Divorce, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (347) 797-1188 | (914) 362-3080 today.