Making ends meet can be challenging for families, and financial planning for divorce can add another layer of complexity. Inflation and rising living costs exacerbate these challenges, particularly for families with children. Quality childcare is expensive and difficult to find, children constantly outgrow clothes and shoes, and food prices are soaring. Financial pressures often contribute to a couple’s decision to divorce, with money problems cited as the second leading reason for divorce.
When a couple already struggling financially considers divorce, the difficulties can increase as they transition from one household to two. Every family’s financial situation is unique, and careful planning is essential. Here are some key factors to consider when budgeting during a divorce.
Housing
If one spouse remains in the marital home, they must understand the full scope of household expenses, including mortgage or rent, utilities, homeowner association dues, taxes, insurance, and repairs. Often, selling the home might be the best solution to avoid financial strain. The spouse moving out will also face expenses, such as deposits, utility connection fees, furniture purchases, and setting up a new household.
Insurance
During separation and divorce, spouses may need to seek separate car insurance, homeowner’s or renter’s insurance, and health insurance. Typically, a spouse can retain the other on their employment-provided health insurance until the divorce is finalized. The spouse who needs to obtain new coverage should budget for this additional expense.
Child Support
In North Carolina, the party who spends less time with the children will likely pay child support. The state provides a child support calculator to determine the amount based on gross wages, overnights, and health insurance costs. Additional expenses like extracurricular activities, vacations, travel, tutoring, birthdays, and gifts should also be addressed. Parents may agree to divide or prorate these costs equally.
Alimony
Many things need to be clarified about spousal support. Alimony is not guaranteed to be a significant amount or last indefinitely. Proof of financial dependency is required, and both parties must understand the conditions that terminate alimony.
Therapy
Counseling might benefit both spouses during a divorce, and children may also need support. Finding a good therapist can be challenging, and budgeting for these services is essential.
Legal Fees
Divorce involves legal fees, and each party will need an attorney. Some law firms offer free consultations, while others charge significant fees. The cost of retaining an attorney and additional court fees can add up, especially if the divorce involves extended litigation. Mediation fees and hourly charges for mediators are also considerations. In contested matters, a judge might order one party to pay the other’s legal fees, typically in cases involving child support, custody, and alimony.
Taxes
Couples can file a joint tax return if they are married at the end of the year. However, certain tax advantages and deductions may be lost after divorce. Consulting a tax professional is recommended, and some couples might delay filing for divorce to retain tax benefits.
McCrary Pack – Supporting Your Financial Transition
Divorce requires careful financial planning and consideration of numerous factors. At McCrary Pack, we understand the complexities involved and are here to help you navigate the economic aspects of your divorce. Contact us today to learn how we can support you through this challenging time and help you achieve a stable financial future.