Breaking up with your spouse or significant other can be devastating emotionally. But it can also be devastating financially because it causes major changes to both what you earn and what you can spend. You may not feel like looking at your budget during this difficult time, but it’s vital to know where your finances stand after the breakup. You’re building a new single life, and you can’t do that until you’re honest with yourself about your new money reality.
Here is some helpful advice for rebuilding your financial life now that you’re on your own:
Expect Lower Income:
It’s time to face facts: two incomes are bigger than one. You used to be able to factor your partner’s salary into your monthly budget, but now you’re the sole breadwinner. You’ll have to modify your budget to match that lower income, and that usually means lowering your expenses. You could get a higher-paying job or a side hustle to boost your income, but that’s more of a plan for the future than a present-day reality.
Adjust Your Expenses:
Being single instantly cuts your income, but you may still be living with high expenses from before the breakup. You have to pay for necessities like utilities, transportation, insurance and food, and now you don’t have another person contributing to the cost. Now is the time to take an honest look at your budget; examine all your spending for a month, and if it’s higher than your income, you have to make changes. You may find some expenses that aren’t essential and can go. Entertainment subscription services and restaurant meals can really add up, and they’re the first place to look when cutting spending. You might also be able to find insurance discounts that help you spend less.
Your Biggest Expense: Housing:
The end of a relationship can be shocking enough, but breaking up when you live together is even worse. One of you is going to have to move out of your home and find new housing. If you own a house together, you’ll have to either sell it or have one partner buy out the other. It’s very tempting to want to stay in the place you call home, but you have to be honest about what you can afford as a single person. An affordable two-income home may be an unaffordable single-income home. The rule of thumb is that you shouldn’t be spending more than 30 percent of your pre-tax salary on your rent or mortgage payment. Any higher than that, and you should seriously consider downsizing. In your newly single budget, housing is one expense you can control.
Divorce vs. Breakup:
There’s a big financial difference between breaking up with your boyfriend or girlfriend and breaking up with your spouse. At a younger age, you may have fewer commitments and expenses, so finding a new place to live and reducing spending could be easier. With a divorce, there may be more assets to divide and more legal involvement. You may end up paying or receiving spousal support, which will factor into your income or expenses. And things get even more complicated if you have children together. People going through a divorce should consider finding a financial planner to help them budget for their new normal.
The experts at Equity Bank want to support you through this financially precarious time in your life. Contact us today, and we’ll work with you to build a budget that fits your new life as a single person. With our guidance, you can look forward to a prosperous and fulfilling future.