Budgets are a Great Tool in Divorce Mediation in NYC
A major reason divorce is so stressful is the fear of the unknown. It is natural for you to be worried about your future living arrangement and meeting your expenses. In most divorces, you will be transitioning from one household to two separate households. This means more expenses to be paid from the same combined income of both parties, which can be a challenge. For example, let’s say you and your spouse earn a total of $125,000 per year. Currently, you are paying a rent of $2,500 per month or $30,000 per year. However, once you are living separate and apart, you could each have a housing expense of $30,000 per year. Your shelter expenses have just doubled to $60,000 per year while your combined income has not increased.
Understanding your Post-Divorce Financial Picture – Living in NYC Post-Divorce
Utilizing budgets during the divorce mediation process is a great way to anticipate and visualize your financial future. Before you make any decisions regarding property division, spousal support (maintenance), and child support, you should have a good idea of your anticipated post-divorce income, your anticipated expenses, and your cash flow. Budgets are a great tool to give you this understanding.
Understanding your Spouse’s Post-Divorce Financial Picture
Looking at your spouse’s budget is also a great tool to understand what your spouse’s financial picture and cash flow will look like after the separation or divorce. The mediation process is truly about listening to your spouse and trying your best to compromise to reach a solution that works for both parties. Instead of just thinking about your situation and how much money you will have to meet your expenses, you should also consider your spouse’s future financial picture. This will help both parties to empathize and compromise to come to an understanding on the various financial issues. It should also help you and your spouse reach common ground.
Budgets are Tools to Make Decisions in Divorce Mediation in NYC
Once you have an idea of your future cash flow and your spouse’s future cash flow, you will have the knowledge to make informed decisions that take future finances into consideration. This can help mediation clients make informed and knowledgeable decisions concerning the division of assets, the amount and timing of child support, and the amount and duration of spousal support. You should also have an idea of the income tax and capital gains taxes that you will likely be paying after the divorce to get a true picture of your net income and expenses.
Types of Budgets to Use in Mediation in New York
Our Mediators have various budget forms available to assist you and your spouse to make post-divorce or post-separation budgets. Some budgets are very detailed and itemize detailed anticipated expenses from housing expenses to the amount of money you spend on magazines or books. Other budget forms endeavor to simplify the budget process by looking at the major line items only. An example of a simple budget follows:
|Less Taxes withheld
|Annual Take Home (does not reflect refund or tax due, only withholdings)
|Take Home per Month
|Plus or Minus Child Support
|Plus or Minus Maintenance
(Does not account for tax treatment of spousal support)
|Cash Flow after Support
|Less Housing Expense
|Cash Flow after Housing Expense
In the above example, the parties are simply looking at estimated after-tax income, support, and housing expenses. The couple above could adjust the support upwards or downwards to an amount that they fell is fair and where both parties can meet their necessary expenses and make sure the children’s needs are being met. The important thing is that this simple budget helps to illustrate the numbers and how they will affect each parties’ future cash flow.
The above budget is a simple one as the only expenses being examined are income taxes and housing expenses. You can add additional major expenses such as food and transportation or you can draft budgets that incorporate all expenses including clothing, insurance, activities, vacations, and more. In mediation, you are in control and have the option of getting as detailed as you like or perhaps you are comfortable with a less-detailed and simplified budget. Either way, you should keep in mind that the budget is a tool to help you understand your post-divorce economic circumstances and to assist you to make important decisions that will affect your future.