During your divorce, your lawyer or financial professional is going to ask you about the financial aspects of your marriage in order to calculate spousal and child support, and divide all marital assets and debts. To do this, you need to have a complete and in-depth understanding of your own as well as your ex’s financial situation.
In most states and provinces, each spouse must complete a Financial Affidavit (sometimes called a Financial Statement or Financial Disclosure) containing truthful and accurate information about his/her income, expenses, assets (this includes all property acquired or earned during the marriage, such as homes, cars, bank accounts, retirement benefits information, stocks and stock options, business assets, and valuable art, jewelry, or collectibles) and liabilities (these are your debts).
One area of the Financial Affidavit that often creates confusion is the section for living expenses. In most jurisdictions, this section is completed using monthly figures (ask your lawyer or financial professional to confirm this for you). When filling this out, keep in mind that there are 4.3 weeks per month – not 4. This is an easy mistake to make, and one that will result in an under-estimate of your expenses.
As you start to fill this out, the best sources of information to have handy are bank statements (including cash withdrawals), canceled checks and credit card statements, and year-end summaries.
Charting Your Living Expenses During Divorce
Charting expenses by category will enable you to create this information accurately. You can do this by hand, or by using software such as Microsoft Excel or money-management software such as Intuit Quicken (which is also available as apps for iPhone and Android).
Analyze your expenses over at least a full year so that you don’t overlook expenses that only occur at certain times of the year – such as back-to-school or holiday expenses or high utility bills in winter or summer.
If you aren’t going to have the time or patience to prepare this analysis in detail, here are some quick tricks that can help you complete this task fairly rapidly.
- First, add the expenses for the items where you already know the exact cost – your mortgage, real estate taxes, home and auto insurance, telephone/cable/internet bills, housekeeper, car payments and life insurance.
- Next, tackle the expenses that you can estimate by week – dry cleaners, groceries, lawn service, fuel for auto, parking, cabs/tolls, grooming, dining out, allowance for kids, sitters/child care and tutors. Remember that there are 4.3 weeks per month.
- Then, call service providers who can provide an annual figure (remember to divide by 12): call the gas, electric and water companies, vet for pet expenses, car dealership or service center for maintenance and repairs, doctors for medical expenses, and health club for recreation expenses.
- Now you’re down to the expenses you need to estimate: home repairs and maintenance, clothing for you and your children, entertainment, newspapers, magazines, books, gifts, donations, vacations, computer expenses, extra-curricular expenses for children, children’s entertainment, and gifts to others.
- Add footnotes to your financial affidavit so you remember how you calculated expenses – especially the ones that you’re estimating.
- Make sure your math is accurate: double-check your figures, especially if one seems much higher or lower than you expected it to be.
Review your draft document with your financial professional and/or lawyer.
- The total monthly figure is a net number that does not include state/provincial or federal taxes that you’ll be responsible for paying.
- Your gross monthly number is the net number plus an estimate for taxes.
Here are a few other categories to consider:
- Expenses for second homes or vacation residences.
- Expenses that you pay on behalf of a parent or emancipated child (these may not be considered by the court, but add them to your first draft to make sure all your regular expenses have been identified).
- Satellite radio.
- Cell phones for you and children.
- Clothing includes shoes, jewelry, and accessories.
- Credit-card charges for stores such as Costco, Walmart, Target, Sears, Walgreens, etc.
- Sporting goods.
- Purchases from hobby stores like Michael’s, Jo-Ann Fabrics, and Hobby Lobby.
- Your continuing education classes or certification renewals.
- Health club usage, classes, personal trainer, lessons.
- Cash withdrawals.
- Boarding expenses for pets when away.
- Reasonable replacement of computers and printers for home and children.
- Vacation costs, including air and ground transportation, tips, dining, entertainment, hotel costs, and airline fees/taxes.
- Therapists for you and children.
- Membership dues for organizations and clubs that you belong to.
- Pass or fees for toll-roads you use regularly.
Sometimes, you won’t have the information to prepare this analysis completely because the information is not available or is in the control of your spouse. If that’s the case, then make sure to add the word “Preliminary” in front of “Financial Affidavit/Statement” as well as footnotes on pages where you lack complete information.
[Ed. You can download a free “Expense Worksheet” here to help you keep track of your pre-divorce and post-divorce expenses.]
Cathy Belmonte Newman (MBA, CDFA) has over 30 years of analytical knowledge, training, and professional experience in corporate finance and family law. In 1999, she founded F4 Financial: a niche financial firm specializing in analytical services and litigation support services to clients in the pre- or post-stages of divorce. She has worked with over 475 clients with monthly living expenses ranging from $10,000 per month to over $150,000 per month. Cathy is routinely selected by top family law attorneys to assist their clients with lifestyle analysis, Financial Affidavits, expense projections, balance sheets, forensic analysis, and expert testimony. f4financial.com