How a Budget Helps Divorce Mediation

How does a budget help facilitate a divorce mediation?

A divorce, by its very nature, is the epitome of financial chaos. It involves high emotional conflict (provided by the spouses), an adversarial process (provided by the legal system), and a group of divorce lawyers who may or may not possess the financial skills to solve the whole thing. Consequently, trying to financially organize a divorce is exceptionally difficult. Without organization, though, the financial stability that (probably) existed during the marriage can evaporate and significant financial imbalances can occur. These imbalances often leave one or both parties without the ability to provide for themselves or their children. A budget (or budgets) can be the first step toward stability. Below is an example of how a budget can help the spouses accept the reality of their new post-divorce situation:

Mediator: I asked you to complete a budget to see how you are going to meet current expenses. How did you do?
Wife: Well, I did like you said and used the checkbook. I figure I can get along just fine if my husband pays me $3,000 per month.
Mediator: Seems like a lot. Let’s go through some of the expenses.
Wife: Okay. The first item is food, at $1,600 per month.
Mediator: What is included in there?
Wife: Groceries for everyone, liquor, entertaining (dinner parties and such), and meals out for my husband and me, and some other stuff.
Mediator: The only groceries you will be buying are for you and your two children. Isn’t that right?
Wife: Yes.
Mediator: Then an adjustment to the grocery amount incurred historically would be appropriate. Since it is possible that your husband consumed at least 25% of the groceries, a reduction of that percentage might be fair.
Wife: Okay, what about the other items?
Mediator: You are going through a divorce. Are you sure you are going to be giving expensive dinner parties? In addition, you and husband are probably not going to be going out together to dinner, and liquor might be considered more of a luxury than a necessity at this time.
Wife: Well, I only drink wine occasionally. He drinks like a fish. So I should eliminate the dinners out, the entertaining, and the liquor from the averages?
Mediator: Yes, and a reduction of the total grocery cost by around 25% might be considered reasonable. What else have you got in the budget?
Wife: Over the last three years, we spent an average of $4,000 for vacations each year. So I put in $3,000 for a vacation for the kids and me.
Mediator: Well, a vacation is considered more of a luxury than a necessity at this point. Your husband, and the court if we cannot work out a settlement, might not consider this reasonable, especially if funds are tight.
Wife: Look, just because that clown wants a divorce, doesn’t mean that I have to suffer. He can do whatever he likes as long as my standard of living doesn’t go down.
Mediator: You and your husband were living in a relationship with two incomes and one residence. Those two incomes will now be supporting two residences. In addition, you and your husband lost economies of scale when you separated. There is some truth to the saying that, “Two can live as cheaply as one.” In the huge majority of divorces, the standard of living of the parties goes down.
Wife: This isn’t fair. I did not want the divorce.
Mediator: I understand. However, the realities of the situation have to be faced. There is a limited amount of resources. Adaptations have to be made to match costs to those resources. Your standard of living has to adjust to resources.
Wife: No vacation in the budget?
Mediator: Not right now. Right now we focus on what you need to get through the divorce. When you work on your future budget, you can consider what type of vacation you will be able to afford.
Wife: Okay.