How to create a budget after divorce or separation

Originally published on 28th May 2024 at 9:10 AM
Reading time: 3 mins
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Like many things in life, the key to successfully getting back on your feet in the event of a divorce or separation is preparation and planning. Because everyone views partnership in different ways, and everyone views money in different ways.

After all, if Jurgen Klopp goes out there every week with a plan, you should have one too!

1. Track your expenses as a single person post-separation

There’s no two ways about it – being single is expensive. When you’re on your own you have to cover 100% of your bills and outgoings by yourself. This covers everything from rent and utilities to food, travel and even subscriptions. They don’t call it the ‘singles tax’ for nothing!

If you’re newly single, your new financial situation might take some getting used to. Consider tracking your expenses for 1 to 3 months, because your bills will be different from when you were splitting costs with a partner. Once you have a good idea of your outgoings, you’ll be able to create a new budget for your new situation. Having a budget will also help you feel in control of at least one part of your life, which is helpful when you feel like you have no control over things going on in your wider life.

Top tip: Check your calendar to see what you’ve got coming up so you can set money aside for it. For example birthdays, weddings, trips planned with friends, meals out, holidays, subscriptions, insurance renewals and Christmas). This is your chance to get ahead of your spending each month rather than having it come as a surprise and catch you out.

2. Build up an emergency fund

An emergency fund (also known as a rainy day fund) is a savings account for unplanned expenses and emergencies. It’s a buffer that protects you from having to put a big purchase on a credit card or sell any investments you have to cover any unexpected costs.

This one's for you if you don’t have an emergency fund yet, or if you do have one but have had to use some of it to get back on your feet. The best place to put this money is in an easy-access, high-yield savings account

3. Plan for the future

What are you planning over the next few years? What are the big goals and dreams you have for your life? Think about your short, medium and long-term goals. Are you buying your perfect house? Sending the kids off to school or uni? Retiring early to travel the world?

Break all of it down to figure out how much you’ll need for each goal and when you’ll need the money. Then you can work out how much you’ll need to set aside monthly and will help you figure out the best place to keep it. For example, a high-yield savings account or Cash ISA would likely be best for shorter-term goals, while medium to longer-term savings might be better off invested, or you might decide to increase your pension contributions for your ideal retirement.

4. Update your will and the beneficiaries on your pension (if these need to change)

Paperwork is notoriously dull and the thing we can easily keep putting off until it’s too late. Make sure your beneficiaries are up to date so that your pension provider and the executors of your will know exactly what your wishes are for your money and other assets. Otherwise they may stay in limbo for a very long time and result in a drawn out battle between your loved ones.

5. Give yourself grace

Any kind of long-term relationship breakdown is a huge adjustment, financially and emotionally. And it’s as important as ever to talk about money with your friends and family, especially while you’re getting used to your new reality.

As you find your feet financially, recognise that you won’t do everything perfectly every time. And that’s ok, because we can always learn something new and do better next time.

If you would like support adjusting to your new financial reality and starting to plan for the future, we have also partnered with Octopus Money to offer you a free Financial Health Check with one of their experts.

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