In a divorce, there are some costs that cannot be avoided—e.g. waiting at the courthouse for your case to be heard. There are other costs that can be. Ask any divorce attorney—litigator, mediator or collaborative divorce—about what other part of the divorce process drives up the costs unnecessarily and most will say when the client is unable to provide a complete and thorough reporting of assets and household expenditures without assistance from the attorney or his/her staff.
That’s why many attorneys, yours truly included, provide clients with worksheets to complete early in the process. With a complete asset and liability chart and monthly budget, the discussions can turn to such matters as alimony and child support, whether it is possible to keep the family home, custody and parenting schedules, etc. If the attorney has to help in filling out the worksheet and acquiring that information, it can delay those discussions. And that’s where legal fees can add up.
When thinking about financials, there’s a tendency to focus on assets: the family home, investments, retirement savings, pensions, investment properties, etc. Of course, those are important parts of coming up with a settlement, but just as important is understanding your household budget.
Let’s be honest. Most couples will know how much the mortgage payment is, how much a car payment is and a few other things. But is it likely that both people know the monthly budget for such things as groceries? What about how much the heat and electricity costs over the course of a year are, or how much fuel the family automobiles use and the cost of insurance for each family car? What about the cost of uninsured medical expenses, prescriptions, and clothing for growing children?
A comprehensive and thorough understanding of what it costs to run your household is critical to your ability to advocate for yourself in a divorce proceeding and to assess settlement proposals from your spouse. The expenses that often get neglected are bills that only get paid once a year, like car insurance, homeowners insurance, life insurance, vacations, incidental costs and smaller fee items. The same goes for things like gym memberships, dance lessons, summer camp and daycare. Having everything you spend money on as a household must be in the budget and as accurate as possible to move the negotiation along.
Having a complete understanding of your budget, assets and liabilities enables you to work with the attorney and your spouse on the kind of life you want after the divorce. For example, many divorcing couples want to keep the children in the family house so they don’t have to change schools. To accomplish that objective will require a certain amount of money. Will the person remaining in the house have enough to do so?
The answer to that question then starts other parts of the negotiation. Perhaps keeping the house is not an option. Perhaps it is but with an adjusted budget that removes some of the non-necessities—e.g. vacations, dance lessons, dining out more than twice a month, etc. By providing a complete and accurate budget, you give yourself and your attorney the tools to begin negotiation much sooner in the process and that will ultimately reduce lawyer fees if everything else proceeds smoothly.
Besides being an emotionally consuming activity, a divorce is time-consuming. You have to track down a significant amount of information at a time when you would rather be doing anything else. Being able to attain that information will help greatly in reducing costs. But there’s an additional benefit.
While a lot of work, many people find completing a budget and knowing exactly what they have for assets and liabilities to be empowering. You now know what you are working with and can start to envision the life you will have after finalization of your divorce. This helps you prepare mentally, emotionally and financially. In a way, it begins the healing process. And it starts by filling out a few worksheets.
Again, to review what a sample asset and liability chart and budge might look like, please visit my website.