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Charting Your Expenses (part two)
Direct and Indirect Expenses
Once you have your family's expenses listed and categorized, allocate them further into direct and indirect expenses. Direct expenses are the expenses incurred specifically for a particular family member. Indirect expenses are the costs for housing and other types of expenses necessary to maintain your family's lifestyle.
Examples of direct expenses are: tuition for a child to attend a private school, college tuition and room and board, clothing, medical expenses, and music lessons. Some indirect expenses are: rent, mortgage payments, utility bills, automobile loan payments, or insurance premiums. Once you have compiled the worksheets for your family's expenses, compute the average monthly total for the children's indirect expenses and direct expenses.
Planning
One hint about expenses: be sure to take a look at what your spouse is doing with his or her money, especially if you both earn a good income. It's not uncommon for divorce lawyers to suggest that a spouse earning an income that exceeds his or her reasonable needs use the excess income to purchase prepaid items, household goods, or other merchandise such as a cemetery plot, a future vacation, or furniture to fill a new home. The intended effect is a reduction in your spouse's bank account balances and an increase in his or her consumer debt -- and subsequently, a reduction in his or her assumed net worth.
Another planning tactic is to prepay household bills that are not customarily listed as current debts on court financial disclosure forms. The goal is to reduce the amount of money in the bank account on the date of the divorce while saving the benefit and use of the money for the spouse who earned it.
Future Expenses
Compare the average monthly costs for yourself -- and for the children if you'll be receiving support -- with the amount of income you expect to receive in spousal and child support after the divorce. Take into consideration the income you expect to earn or receive from all sources using the numbers in the worksheets regarding your family income.
Inflation becomes a factor in your financial planning for long-range goals that you expect to obtain three or more years in the future. Check with a reference librarian, the financial pages of the newspaper, or an accountant to find out the predicted annual rate of inflation for the next few years. Once you have the rate, multiply it by the current cost of the item and again by the number of years you plan to save money to make the purchase.
Planning for Special Situations and the Future
You should also determine and plan for your family's future expenses and lifestyle. For example, if you need to plan for your home being sold, anticipate your family's costs for living in a new residence. Also, add into your future expenses any spousal or child support you may be responsible for paying.
If you want to retain the family home, have the home inspected to learn if it needs any major repairs and the life expectancy of the roof and the heating and cooling system and major appliances. Add the cost of repairs and replacement of non-functioning or nearly worn-out items into your anticipated future expenses. This also applies to your vehicle if it's an older model, has high mileage, or is not in good working condition.
Get medical and dental checkups for yourself and your children prior to the divorce. If you have postponed medical or dental care, especially if you are a dependent spouse, take care of your needs prior to the divorce. The same applies for your children. If glasses, contacts, orthodontia, or braces are in the immediate future, get an estimate of the cost of the treatment or supplies and the terms of payment.
Break down the costs of health insurance to ascertain what the cost is for the children's coverage only. If both parents have group health insurance coverage for the children, compare the type of coverage and costs to have the children on each plan. Learn the cost for the group coverage, the deductible, the type of benefits available, and the length of time you and your children are eligible to receive the insurance coverage.
If your child has special medical needs, prepare an itemized list of all the special expenses you incur for the child's medical care. For example, a child with diabetes has higher expenses for medical care, recreation and food than a child without diabetes. The difference between the costs in these categories for a diabetic child and a non-diabetic child may be the basis for requesting additional support and special health-insurance provisions.
Make plans now for anticipated future expenses such as a vocational or college education, weddings or other future events.
CONTINUE
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