Budgeting for Spousal Maintenance

Budgeting for Spousal Maintenance

One of the financial issues to address in almost every case is that of a client’s monthly budget for personal expenses. There are three customary methods to address monthly budgets.

Method #1: Historical income and estimated cash flow: If historically a family of four has had $6,000 of after-tax monthly cash flow available for spending, it would be unrealistic for one party to present a budget for themselves of $5,000. It is not unusual for families to spend more than their reported incomes. This can be done either through incurring debt (credit cards and lines of credit), selling assets, and receiving gifts from parents, or using cash from unreported income.  It’s been our experience that if spending is being subsidized by debt and/or asset sales, the budgets will typically need to be reduced to levels that can be funded by the available incomes.

Method #2: Bank Statement Analysis: Often times the parties will utilize one or two bank accounts from which to pay their expenses. These accounts will typically include spending by checks, cash withdrawals, automatic payments or debits, and credit card payments. Tracking and totaling these general withdrawals of funds on a monthly basis may not give you the details of every expense, but it will give you the total spending on an aggregate basis. For example, if historically the earlier family of four had $8,000 of average total spending in the bank account, it would be unrealistic for one party to present a budget for themselves of $7,000 for themselves. In some cases there may be a larger payment in one month for a non-recurring or non-budgetary category of spending, like income taxes or investments. In those cases an adjustment can be made on the schedule to remove that item.

Method #3: Detailed spending analysis: In some cases, the parties request a detailed spending analysis which results in taking every bank statement and every credit card statement and allocating each check and charge into an expensive category. Because of the amount of time needed to account for that level of detail, this type of analysis will be the most complete, but will also be the most costly and time-consuming to prepare.

Posted On

August 26, 2017

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