Now that tax season is almost over, we should all have a pretty good grasp of our income and major expenses. The key now, whether you are on your own or with a partner, is to figure out whether you are saving enough or spending too much, and make appropriate adjustments as needed.
When I began practicing family law 20 years ago, I had no idea how much time I would be spending with my clients reviewing household budgets. In fact, after educating people on the law, an inordinate amount of my time is often spent on financial literacy, which is a skill that many seem to lack regardless of race, gender or education.
In all divorce cases, whether in mediation or divorce court, we spend a significant amount of time analyzing budgets and determining whether a person’s expenses are reasonable compared to his/her income. While we understand that a separation throws a household budget off kilter for a while, we want to see that each person has done his/her best to mitigate the damages, including maximizing income and curbing discretionary expenses. If someone is spending more than 30% of his/her gross on housing, that will be something that needs to be explained– along with any major deviations to the norm for other necessary expenses, including food, medical care, transportation, and clothing.
Why do we care so much about budgets? Because ultimately, the goal really is for each party to be self-supporting, and for the kids’ needs to be met to the best of each parent’s capacity. When awarding spousal support in jurisdictions likes MD and DC that lack a set formula, the driving issues are (1) the recipient’s reasonable need for assistance (after s/he maximizes his/her own income potential) vs. a payor’s ability to provide financial assistance after meeting his/her own reasonable obligations, including any child support payments.
Going through a divorce is a harsh way to learn about your rights and obligations in family law, as well as the importance of a balanced budget. If you are like me, more focused on preventive medicine vs. opting for emergency surgery, now is the time to reach out to a professional that can help you figure out how to 1) maximize your income; 2) cut expenses; 3) balance your household budget; 4) improve communications with your partner on all these topics or 5) explore legal alternatives (like a prenup or postnup) to separate your finances if you and your partner are not on the same page about money.
By Regina A. DeMeo