The B word
Callum Sutherland - Oct 06, 2023
Yes, I too dislike making a budget. It is a necessary evil and if you want to feel better about it, call it a spending plan.
The third step mentioned in my previous blog is the dreaded B word, budgeting. Yes, I too dislike making a budget. It is a necessary evil and if you want to feel better about it, call it a spending plan. The bottom line is you need to know what money is coming in and what money is leaving. You are leaving a relationship and likely have split many expenses. You are going to need to adjust, especially in the first few years when everything is new to you. Good news, if you and your ex worked with a budget before, this process will be easier for you. Starting from scratch always takes longer. You will have to have some patience because there will be some unknowns that take time to sort themselves out, like child support, spousal support, living arrangements, and even the grocery bill will look different.
Step 1: Calculate monthly income and known monthly fixed expenses
Step 2: Evaluate the variable expenses and determine if there is room or a need to reduce or eliminate them. One area to look at that can often be eliminated is your subscription services. Many of us have too many, so many that we sometimes can't remember which ones we have.
Step 3: If possible, start building an emergency fund for the unexpected. It is extremely important at this point because legal expenses may come up depending on how amicable the separation is going.
Step 4: Determine a spending amount. It always feels much better to spend than to focus on what you can't do. It is important to be frugal if necessary but you have to be realistic. It's unlikely you are coming out of a relationship rich unless you are married to Bezos or Bill Gates, but you can come out OK.
Step 5: Set up times to review, monitor, and adjust. Be compassionate with yourself and have patience. Going from dual income to single income is a big change.
Going through a separation is expensive. Money will cause stress for most people during this time. It is not the time to close your eyes and hope it works out. Pay attention, plan the best you can, and seek help, if for no other reason to have an objective point of view.
What is the 50-30-20 rule?
This is a rule of thumb suggesting you spend 50% of your income on needs, 30% on wants, and 20% toward savings.
What is the difference between a need and a want?
A need is essential or required for survival, well-being, and maintaining a standard of living. A want is something above and beyond and is to bring extra or enhance your current living situation or comfort. This seems easy but many people confuse the two.
What is the 70 20 10 rule?
This is another rule of thumb. In this case, it suggests you spend 70% of your monthly income, save 20%, and donate or pay off debt with the remaining 10%.
What do you find most difficult about developing your spending plan?