May 1, 2015
What can you do when you have two people, one pie, and each one wants three-quarters of the pie? And nobody wants to accept a smaller piece of pie?
In many of my divorce cases, and I’m guessing yours too, we are working with a couple who have shared a pot of money that covers their combined expenses. Now that they are splitting up they are creating two separate households, but the cost of these individual households is not simply one-half of what they previously spent. Most of the time it is more than half. Instead of one shared mortgage, each party has a mortgage or monthly rent to pay. Utilities are doubled. Other expenses may increase if the couple split parenting duties, such as requiring two living spaces for the children. Thus we are faced with a situation in which the combined income required to cover the two new budgets is more than what the couple had been living on before the separation.
This scenario can cause a lot of anguish, because each party requires more income and is reluctant to reduce expenses in order to accommodate the other party. Let’s use the typical circumstance of a one-paycheck family (a stay-at-home wife.) If the husband is going to pay alimony he may not like the idea of reducing his spending to support 100% of his wife’s desired lifestyle. Why should he give up his lifestyle to accommodate hers? Or the wife may balk at the possibility that the support she is to receive won’t be enough to cover her desired level of spending. How do you appease both parties?
In this situation husband and wife are both going to have to compromise and one strategy is to have both parties compromise equally, so each feels the other is giving up as much as he or she is. This can be helped by dividing each party’s expenses into discretionary and non-discretionary costs. Non-discretionary expenses are those that must be paid and cannot be changed – they would include rent, mortgage, property tax, health insurance, and an amount that both spouses agree is reasonable for such items as groceries, clothes, utilities, etc. Everything else is discretionary, and by definition can be increased, decreased or omitted if necessary. If both spouses can agree that they both require a certain amount of income they may be more willing to accommodate the other.
Your negotiating skills, along with a financial divorce specialist, can help the parties create their non-discretionary and discretionary budgets. It’s important for each spouse to agree with the other’s non-discretionary expenses. When that is accomplished each spouse can relax a little, knowing that their basic needs will be met, and each has a better understanding of their own needs and wants as well as the needs and wants of the other spouse. Income above that required to satisfy the non-discretionary budgets is available for the discretionary expenses and support, and can be divided up so that both of them can cover the same amount of discretionary expenditures. Now they both know they are living equal lifestyles.
