Though the first financial issue to address in almost every case is that of a client’s monthly budget for personal expenses, there are also other factors that must be evaluated. Some of the most common ones are:
Business Expenses: In cases where one of the spouses is self-employed or owns a business, adjustments may need to be made to the personal budget for expenses that are being paid for (and deducted) by the business. Removing these expenses from the personal budget will avoid the issue of “double-counting.” Typical business expenses could include vehicles, meals, entertainment, travel, cell phone and education.
Payroll Deductions: In many cases an employee has payroll deductions for health insurance, dental insurance, vision insurance, life insurance, disability insurance, union dues, United Way contributions, parking, retirement contributions, etc. Clients may be including these payroll deductions as part of their monthly budget. If projected cash flow schedules you are utilizing already include those payroll deductions, then the personal budget should be adjusted to remove these expenses to avoid the issue of “double-counting.”
Credit Card Payments: Client budgets will sometimes include a monthly credit card payment. In some cases this amount represents an ongoing minimum monthly payment due to the existing outstanding balance on the card. If the credit card balance is already listed on the property settlement schedule, then keeping this payment in the budget might represent a “double dip.” In other cases the credit card payment represents an average amount of spending that gets charged to the card each month. In those cases the client should attempt to break down the monthly amount into the appropriate categories on the personal budget to make sure categories aren’t counted twice.
Expenses for Children: Clients should be encouraged to split their budgeted expenses into those for themselves vs. those for the children. Some expenses are easier to separate, like school lunches, sports, music lessons, etc. For other expenses it is more difficult to separate, like groceries, clothing, grooming, gifts, entertainment, restaurants, and travel. Having the children’s expenses separated allows for the parent’s budget to be isolated, which can be helpful for purposes of determining potential spousal maintenance once the children are emancipated.
Medical and Childcare Expenses: It’s fairly common for employers to offer either a Flexible Spending Account (FSA) or a Health Savings Account (HSA) option to employees as part of their benefits package. These plans allow the employees to withhold money from their paycheck on a pre-tax basis and then receive those moneys back when they incur medical and/or daycare expenses. If a client is participating in such a plan and is reducing their net pay for these with holdings, they should not also be including those same expenses in their personal budget.
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