Getting divorced isn’t just about separating your life from your spouse, but also your finances. If you’re going to be receiving alimony, that means figuring out where that money fits into your overall financial picture.
How exactly do you do this?
In this post, we’re going to offer several suggestions on how to use your alimony check for maximum benefit.
Develop a Budget
In the first six to 12 months after your divorce, it’s crucial to develop a budget. If you didn’t handle the finances before your divorce, this can feel like a major challenge, but you can do it with a bit of effort and planning. Use financial planning software to come up with a list of your income sources and expenses. Then draft a plan that allows you to stay within your means. Your alimony check should be part of this.
Something important to remember is that in a number of different ways, it’s more expensive to live separately than it is to live together. Couple this with the fact that divorce is already forcing you to divide the money that you’ve been sharing with your spouse and it adds up to learning how to live with less. Reassess all your expenses. Look at last year’s bank and credit card statements to come up with estimates. If you need help, don’t hesitate to enroll in a money management course or work with a financial planner so you can stay on track with your budget.
Another thing to remember is that alimony is taxable. Every time you receive an alimony payment, set part of it aside to pay the taxes on it. Don’t spend it now and get in a bind when taxes are due.
Prepare for Life without Alimony
Alimony payments should never be considered a permanent solution. If you are receiving alimony, your ex-spouse may retire or become disabled, and the payments will stop. You will also stop receiving payments if you live with someone or remarry.
Because of these things, it’s smart to put alimony into a separate column for income and look at it as a temporary crutch you can use to help get yourself on your feet financially. Ideally, you want to come up with a plan that gradually decreases your dependence on alimony until you don’t really need it anymore.
Pay Off Debts
Divorce can be costly for both spouses. Your alimony payment can help pay your attorney fees and any other debts for which you are personally responsible. Make this a top priority, so you can get out of debt quickly and start raising your income level with a new job.
Use Alimony to Further Your Education
Since alimony won’t last forever, you’ll need to start working again. You may need to acquire new skills or training to get a job. Your alimony payments can fund your education costs, required licensing, and any equipment you need. A new job will boost your confidence along with your income.
Pay Rent and Other Monthly Bills
Especially early on, alimony is likely to make up a decent portion of your regular monthly income, so it is important that you treat it as such and use it to cover the cost of typical living expenses.
Beyond this, you may have needed to move due to the divorce. Your alimony payment can go toward the deposit, the first month’s rent, and the cost of setting up various utilities.
Hold Off on Big Purchases
To the extent that you are able, don’t make any huge financial commitments the first year after your divorce. Give yourself the time you need to adjust to your new financial circumstances and learn how much money you really spend on a monthly basis before, say, deciding to buy a house or a new car.
Consider Health Insurance
It’s more expensive to have your own insurance plan. Research plans that will work best for you and be sure to allocate part of your alimony payment to protect your health.
Use Alimony for Professional Services
Several types of professional services can help you recover after your divorce, and alimony payments can pay for those services. Enlist the help of an attorney to help plan your estate. You can also hire a life coach to help you start a new career. Finally, you can use your alimony payments for therapy sessions. They will help you sort through your emotions and gain strength.
Obviously, these are just suggestions. How you end up using your alimony check will depend upon your specific circumstances and needs. The important takeaway here is to figure out what your expenses are going to be like as you start your new life and how alimony best fits into that.
Have more alimony questions? Call us today for a free consultation.