Hair wash

Well not quite, but Part 2 Expenses of the Financial Statement relates to your monthly expenses, which essentially deal with all the money going out each month. Something none of us likes to think about and until you write it down, you often do not realize just what it is you are spending monthly. This process can be agonizing for some. You are already emotionally a wreck and dealing with these figures can send you over the edge – it seems so unnecessary to deal with this given the other things going on in your life. It is, however, part of the financial statement which is one of the first things to bedone by both parties as part of the requirement for full and fair financial disclosure.

Income is dealt with in Part 1 of the financial statement. This part indicates what monies are coming in each month. Now we need to determine how much is going out and whether you have a deficit or surplus at the end of the month (income minus expenses). We are often asked if it is better to have a deficit. It is neither better to have a surplus or a deficit. What is best is to be truthful as to what your expenses are. Do you think you are making ends meet each month with a little over or is there a shortfall?

Deductions – Your T4 or latest paystub will assist in determining what your deductions are for CPP, EI, Income Tax, and other deductions taken directly from your pay.

Housing and Utility Expenses – Review your monthly bills to see what you actually paid over the course of the last year and divide by 12. This will take into account the colder months when your heating may have been higher or perhaps you use more electricity during the summer months when everyone is home.

The balance of the monthly expenses are pretty straight forward. Look at your bank statements or online banking transactions and see just what you are spending. Divide the yearly expense by 12 for a monthly figure or if a weekly figure multiply by 4.33 (because some months have more than 4 weeks). Keep in mind that there is one less person in the household (if yours is a recent separation) and adjust your figures accordingly.

The extraordinary expenses for the children will be set out on Schedule B to the Financial Statement. The monthly figure should be shown in your monthly expenses for the portion to be paid by you.

Often we hear that “he put down $500.00 a month for entertainment so I should have the same”. It is not about what the ex spouse put down. He or she will have to justify their values. It is about what you truly spend. There are opportunities down the road for either side to be questioned on the values in their financial statement. A financial statement is a sworn document. By signing the statement you are stating that to the best of your knowledge and belief, the facts contained therein are correct. It is not something to be taken lightly. If you are asked why you put $500.00 a month for entertainment, you need an answer – it can’t be “well the law clerk told me to put that in”, or “my husband spends that so I should be able to”. It must be what you truly believe you spend – well I go to the movies 2x a month, plus I belong to a chorus which costs me “x” dollars and I golf which costs me “x” dollars. Better to have an explanation.

Over the course of your legal proceeding, you may want to start a folder and keep certain major receipts. I am not speaking of keeping every receipt for groceries (after all I really don’t want that receipt for your shampoo and conditioner) but you may want to start organizing your household bills in a fashion that you can easily access bills if required to explain any of your expenses. If you do repairs to the home, you will want to keep your receipts to prove that you paid that expense.

If you note a current monthly expense for savings, there should be a corresponding asset under the Bank Accounts, Savings. If you note a debt payment, there should be a corresponding debt under the Debts section. Your monthly expenses need to accurately reflect your current lifestyle. If for example the total of your monthly expenses are high, and you have a deficit, we will look to the debt section to see if in fact you are incurring greater debt to fund your monthly expenses. If there is no corresponding debt, it would seem that your monthly expenses are somewhat inflated. Similarly, if you have a significant surplus there should be a corresponding savings and if not, perhaps you have not taken every expense into account.

The Proposed Budget at the end of the Financial Statement will be completed in the same manner, however, it will include those expenses which you cannot currently afford but hope to once you resolved your outstanding issues and have either purchased your spouse’s interest in the matrimonial home or purchased or rented a new home i.e. mortgage, taxes, insurance not previously paid by you, vacation expenses you didn’t want to spend during the ongoing litigation, etc.

This can be a good opportunity to actually review your spending habits and see if there are any ways to trim the Budget. We are all guilty of spending more on the “want” vs. “need” side. With the recent recession many people have cut-back and trimmed their budgets. Actually looking at your bank records to see what you spend can be a wake-up call to your spending habits.

Remember your lawyer’s law clerk or assistant is there to help you and make the process easier. Don’t be afraid to ask for assistance.