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Charting Your Expenses
Your family's lifestyle and reasonable needs are two components of expenses that play a part in a divorce. The task of budgeting your family's past, present, and future expenses may seem daunting. Here's some help to get you started.
By Laura Johnson
In a divorce, you'll hear the phrases "maintain a lifestyle to which your family is accustomed" and "reasonable needs." There's an inherent conflict between the concepts of lifestyle and reasonable needs. The cost to meet the reasonable needs of your family may be much different than the cost of your lifestyle.
Webster's Dictionary defines "lifestyle" as the "consistent, integrated way of life of an individual as typified by his manner, attitudes, possessions, etc." Reasonable needs are those things necessary to sustain a family with the basic requirements. The qualifier "reasonable" adds the limitations of not excessive or extreme.
Your family's lifestyle and reasonable needs are the two components of expenses that play a part in a divorce. The difference in the definitions between "reasonable needs" and "lifestyle" becomes painfully obvious when a divorce court sets an amount of money for child support or spousal support. Quite often, the support amounts don't satisfy either spouse's expenses to maintain previous lifestyles or the family's current reasonable needs. This may lead to each ex-spouse believing that he or she is either paying too much or not receiving enough money for support. In reality, both spouses have to make adjustments in how they each pay for their needs and maintain their lifestyle.
Historical and Current Expenses
Your first step to determine the cost for your family's lifestyle is to gather documents showing how your family has spent its money over a period of time. Several years worth of records are optimum, but records beginning one year prior to any separation may suffice. Some of the records you need are: bank account registers, canceled checks, paid bills, credit-card statements, loan papers, and cash receipts.
To keep better track of expenses, change some of your spending habits. Start paying for as many expenses as possible with a credit card or check. Keep a daily log of any cash purchases.
Enter your current daily expenses under the proper categories into daily or weekly worksheets. An example of a monthly worksheet can be found at the end of this story; to modify it for daily use, substitute "Mon., Tues., Wed.," etc., or "week one, week two, week three" etc. for "Jan., Feb., Mar.," etc. At the end of a month, add up all of your weekly expenses by category to get a monthly total for each category. Then add all the months' totals and divide by the number of months to get an average monthly total for each expense.
The average numbers you reach from your record keeping are the same ones you'll use for proving your reasonable needs. They will also help you substantiate and describe the historical cost to maintain your family's lifestyle.
Organizing Your Records
Organize your documents by year to prepare a historical accounting of your expenses.
Define and list the categories of expenses and the family members who benefit from the expense. For example, canceled checks made out to the telephone, natural gas or electric companies could all be classified as utility expenses and all family members benefit.
The next step is to review each canceled check, paid bill, receipt and credit card statement to categorize all the transactions. At the same time you are categorizing the expense, record it into your system. Enter the expenses that you pay annually in the month you make the payment. Examples of these expenses are real estate taxes or insurance premiums.
If you don't pay all your credit-card bills in full every month, make a notation of the full amount of the bill and the amount you paid.
In some instances, the payment you make on the balance owed may be a monthly expense. Don't forget categories for interest, penalties, and late fees.
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