Financial

Budget

Drawing up a budget during the divorce process is the first step in establishing your financial position and will be used in any negotiations. Your solicitor will no doubt ask for it in the early stages. It is therefore best to tackle this exercise as soon as possible.

'Money is better than poverty, if only for financial reasons.'
Woody Allen

I don't know where to start
You have to start somewhere. We have provided a budget planner to help you. It divides your outgoings into three sections: Firstly, fixed outflows such as housing costs and taxes which have to be paid regularly and on time; Secondly, variable costs which cover things like household expenses and travel to work; Thirdly, savings and investments, i.e. money you put aside for the future, such as pension contributions and savings for emergency expenditure.

It is important to include all your outgoings
Don't forget things like haircuts, newspapers, decorating, maintenance, vet fees and include incidentals like birthday presents. Don't forget to include any quarterly bills and annual ones like insurance. Ask another member of the family or close friend to have a look at it once you have completed a first draft.

Budget Planner

Cash flow statement for year ending.........

INCOME
Salary£......
Bonuses & Benefits£......
Investment Income£......
Other£......
Total Income (Figure 1)£......
EXPENSES - FIXED
Housing Costs
Mortgage payments or rent£......
Council Tax£......
Utilities (water, gas, electricity)£......
Total Housing Costs£......
Others
Insurance (life, private, medical, car)£......
Taxes & National Insurance£......
Other loan payments£......
Total Fixed Expenses (Figure 2)£......
EXPENSES - VARIABLE
Food & household expenses£......
Car (tax, servicing, petrol)£......
Travel expenses£......
Television (license, retail)£......
Clothing & personal care£......
Holidays & entertainments£......
Child care£......
Total Variable Expenses (Figure 3)£......
SAVING AND INVESTMENTS
Pension contributions£......
Individual Savings Accounts (ISAs)£......
Savings Plans£......
Others£......
Total Savings (Figure 4)£......
To calculate your total outgoings, add together figures 2+3+4.
Total outgoings (Figure 5) = (Figures 2+3+4)
To find out your total balance, take away your total outgoings from your total income.
BALANCE = Total Income (Figure 1) - Total Outgoings (Figure 5)
£.............................

There seems to be money left on paper but I never really have any
If you do the exercise and, on paper, you appear to have a surplus of income over expenditure whereas in reality you have nothing left at the end of each month, or indeed overspend your income, you will need to do audit your expenditure. This means that for one month, you carry a notebook and pen with you and write down absolutely everything you spend money on (from train fares to toiletries). This is the only way to establish exactly how much you are spending. You may easily find a multitude of little extras you forgot to add in.

Financial Guru
You may have seen the BBC programme, 'Your money or your life' with Alvin Hall. He acts as a financial guru when someone gets into difficulties and the first thing he does is this financial audit. He examines every piece of expenditure no matter how small and it is surprising what most of us forget to include and, on a monthly basis, it all adds up. (Check out our Books section for details about his book, an excellent read.)

Working out your financial position
When you have drawn up your budget, you then need to work out your overall financial position, or balance sheet. While the budget shows your position over a period of time, a balance sheet is a snapshot at a specific date. It includes all your family's assets and liabilities and enables you to work out how much you and your partner are worth. It should include the current value of your pensions. (Your adviser can estimate these. Check back in our Pensions article In this section and find further details in our Further help section.)

ASSETS

Statement of financial position as at............

CASH & CASH EQUIVALENTS
Building society accounts£......
Bank accounts£......
Others (TESSAs, ISAs, National Savings£......
Total Cash & Cash Equivalents (Figure 1)£......
INVESTING ASSETS
Life assurance plans (endowments, bonds)£......
Personal equity plans£......
Equity ISAs£......
Unit & Investment Trusts£......
Stocks & Shares£......
Others (overseas investments, BESs)£......
Total Invested Assets (Figure 2)£......
USED ASSETS
Main residence£......
Other property£......
Car£......
Personal Assets (furniture, pictures)£......
Total Used Assets (Figure 3)£......
PENSION ASSETS
Personal Pension Plans£......
Company Pensions£......
Paid up Pensions£......
Total Pension Assets (Figure 4)£......
Other Assets (trusts etc.) (Figure 5)£......
TOTAL ASSETS
Figures 1+2+3+4+5 = Figure 6£......
TOTAL LIABILITIES
Credit Card Balance£......
Other Loans Balance£......
HP Balance£......
Mortgage Balance£......
Bank Overdraft£......
Other£......
Total Liabilities£......
NET WORTH
Total Assets (Figure 6) - Total Liabilities (Figure 7) = £.........

Note: Use current surrender value of endowments and transfer value for pension plans.

We thank Fiona Price and Partners, the leading group of independent financial advisors to professional women, for their assistance in preparing this article.


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