One tool in the financial neutral tool belt is Budgeting. Some view budgets as intimidating, but the process of budgeting can be incredibly cathartic.
A collaborative divorce professional team is comprised of two attorneys, a mental health neutral and a financial neutral. It is the financial neutral’s role to collect the financial documents, build out a spreadsheet of the assets and liabilities, and assist with the option development process, among other things. One tool that the financial neutral has in his or her financial tool belt is a budget. Some view budgets as these scary, intimidating things that we may feel puts us into boxes or controls our lives. They are highly underrated.
The process of completing a budget can be incredibly cathartic.
Categorizing bills and organizing expenses unveils one’s true spending habits. This may be a reassuring process, where one feels validated in their spending, but it can also be especially eye opening to know how much one is spending. A swipe of a card allows us to keep an arm’s length between ourselves and the actual expense. Some people are cognizant of these things and some people are not. It can depend on who took care of the financial responsibilities in the marriage.
The process of completing a budget is a tool for option development, as well. A budget can be used in projections to help determine what resources are needed for a spouse in a financial agreement. A common question in cases: If one spends X dollars per year, how long will X dollars last them? An offer may look great on paper but not so great in projections. Although we can pretty much guarantee that the budget created will not be the actual numbers going forward, it is a great place to start.
The process of completing a budget can also help one to set expectations.
It can help determine if a house should be kept or sold. For example, if it is determined that a likely settlement and budget will not support keeping the house, then it makes sense to move on to a Plan B or C for housing options. Finally, the process of completing a budget can also assist in prioritization. If one feels they would rather take nice vacations than have a more expensive house, then it is easier to see where those adjustments need to be made.
The failure to address budget and projections may lead to a financial settlement that sets oneself up for potential failure.
If one does not know their spending habits and its impact, then they likely will not change them. They will take the more expensive house, and also go on vacation. They might end up in a situation where they inadvertently run out of money and then wonder what happened. The goal is through education, budgeting and projections, we help clients make the best financial decision for themselves.