Budgeting – a critical part of the divorce process

David Mills

By David Mills, Financial Advisor at Morgan Stanley

Updated January 10, 2025

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I think budgeting is a critical part of life and particularly as it relates to changes when you’re going through a divorce, when you think about what your life will look like potentially or supporting your family without a partner. I think budgeting plays a critical role. As you think about budgeting, you want to think about what’s the process and how you get started. The first step is really to think about your income and you’re going to think about your after tax income. And so you’re going to think about what’s going to be coming in and then you’re going to think about what’s going to be going out and then you’re going to want to come up with a process. There are several different processes for budgeting. One of the more popular I’ve heard is the 50, 30, 20.

So 50% of your income goes towards your fixed expenses. So your utilities, your mortgage, things like that. 30% goes towards discretionary things, right? So dining, travel, clothing, those sort of things. The third step would really be monitoring it and sort of tracking that. And there are some great apps online, but it allows you to take in all of your different expenses, your spending, from your credit cards to your checking account, aggregate that, and then you can spend a little time in there categorizing if it doesn’t recognize a certain expense. But you’ll be able to get your arms around the budget and sort of understanding what your monthly outflow is. And from there, on the other side of divorce, you want to automate as many things as possible.

And then finally you’ll want to go back and track and you’ll want to track it on an ongoing basis, particularly because it’s not the same amount every month. So that’s why it’s important to set aside that extra the 20% at the end of the month for rainy day or extra things that aren’t predictable.

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