How to budget for alimony payments

What is alimony?

Alimony is often part of a divorce settlement or separation and is defined as money that one spouse is required to pay another. These payments are intended to provide a certain amount of financial support to the spouse who makes less money. In some cases, the other spouse may not make any money at all, and alimony is intended to help them get back on their feet.

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Some states refer to alimony as spousal support or spousal maintenance, and it can be granted to either member of a divorcing couple. The law in many states indicate that a divorced spouse has the right to live the same quality of life as they did when they were married.

When a marriage is dissolved, either through divorce or separation, a court may award alimony to one spouse. Or, if the dissolution is more amicable, the couple might come to an agreement that one spouse will pay alimony to the other. If a premarital agreement, colloquially known as a prenup, has been signed, it may dictate the terms of who pays alimony and in what amount, which can simplify things significantly.

If there is no prenup and alimony is negotiated in a settlement or ordered in a court, one spouse will send regular payments to the other on a schedule. In some instances, this money may come directly from the paying spouse’s paycheck due to what’s called an income-withholding order.

A spouse who refuses to pay alimony or doesn’t keep up to date with payment may face civil and criminal charges.

Who is entitled to alimony?

In many cases of a traditional, heterosexual marriage, the men have been the breadwinners and women may have had a career at one time but may have taken a step back to focus on their families. If that traditional heterosexual couple separates, the woman will be at a distinct financial disadvantage. In other marriages, if one spouse has a medical condition that keeps them from working full time, they would likely be entitled to spousal support, though the final say would be up the courts.

How long does alimony last?

The length of alimony may depend on the type of alimony it is. Temporary alimony is paid to one spouse while the divorce is pending and stops when the divorce is finalized. On the other hand, permanent alimony is paid monthly until one spouse dies or the spouse who is receiving the payments remarries.

More temporary alimony arrangements include rehabilitative spousal support and reimbursement alimony. The former is paid to a lower earning spouse while they are looking for work, taking classes, or completing trainings for work to raise their income. Reimbursement alimony is similar, but it is paid after the fact to reimburse a spouse for expenses like tuition or work training. These types of spousal support typically have a specified end date.

How to budget for alimony payments

Whether you’re making or receiving alimony payments, you’ll need to take your budget into consideration. Unless it’s specified in an a prenup, there are a few factors that are taken into consideration when determining spousal support:

• Each spouse’s earning power and how the other contributed to it
• How long the marriage lasted
• Whether each spouse is able to support themselves financially and the standard of living that was established during the length of the marriage
• Division of assets and property
• Health and age of each spouse

If you don’t already have a budget, you should master the basics of budgeting and tracking your money. A great way to track your income and expenses is with an Excel spreadsheet.

Whether you’re paying or receiving alimony, your finances are going to be different than what they were when you were married, and it may be difficult to break some of the spending habits you developed during that time, even if you’re a relatively frugal individual. You may want to cut some recurring monthly expenses in order to meet your financial goals and start saving aggressively. One way to avoid overspending while you adjust to your new financial situation is to create a zero-based budget, where every dollar of income is allocated to something.

If the idea of paying or receiving alimony makes you nervous about the state of your bank account, take a deep breath and start making a budget.