Wednesday Workings - Why Your Financial Statement is Important

One of the first documents I ask clients to prepare here in the Trenches is their financial statement.  "What is a financial statement," you ask?  Simply put, it's a budget.  You know, one of those things we're told every household should prepare and use, but almost none of them do....until you're getting a divorce.  Then, it's one of those documents that you are required to file with the court.  Preparing one of these financial statements is a daunting task, as in most jurisdictions it is 8 or so pages long.   Lots of clients try to half-ass it and guesstimate the dollar figures.  In my office, that doesn't fly.  I've been in the Trenches for almost thirty years, and I've seen hundreds of financial statements.  I know what numbers look reasonable and what don't (just a hint - any financial statement in which all the entries end in zero or five don't pass muster).

Oh, I hear you saying that it's just a stupid form, so why put any effort into it?  Well, because it's not just a stupid form.  It is perhaps one of the most important documents you'll create.  How can I know how much alimony you'll need, if I don't know your expenses?  How can I know how much alimony you can afford to pay if I don't know your expenses?  You want to keep the house?  Terrific, but can you afford it?  The financial statement lets me know.  Were you and your spouse living beyond your means and we need to talk about more realistic expectations for the future?  Will you be able to add to your retirement, post divorce?  Yup, all things the financial statement tells me - if you put the effort into it to do it right.  Otherwise, you're right, it's just a form.

So, get out your checkbook, your credit card statements, your bank statements.  Take a look at your historic spending.  Think you'll need to move?  Look into housing costs where you might want to live.  Is your car on its last legs?  Look into the cost of car payments for a newer one.  Footnote the heck out of your financial statement.  Be as accurate as possible.  Help me to help you.  Here in the Trenches.