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10 Steps to Financial Planning for Single Parents
Single parents deal with all sorts of challenges. Perhaps one of the most considerable difficulties they face is handling finances.
Between work, school, and feeding everyone, it can be tough enough to plan out a single week, let alone think about the years to come. Toss that in with finding extra money to enjoy quality time with your family, and it’s easy to get flustered.
Don’t get overwhelmed or let it all intimidate you. We are going to give you a clear guide to financial planning as a single parent, so you can start down the right path of saving for the future.
Introduction to Financial Planning for Single Parents
We understand that every parent has a unique situation. The main thing here is to start moving in the right direction, do what you comfortably can, and take baby steps.
We’ve put together this 10-step plan that can help you get your finances in order and set you up further down the road.
1. Draft Your Budget
One of the first things every single parent should do in their journey to financial planning is to create a budget. Only then can you start to see where the pieces of the puzzle truly land.
You’ll want to account for your monthly income and general expenses. It helps to take a look at your past pay stubs and bank statements. Don’t forget to factor in additional income like child support or random costs like upcoming doctor’s visits.
Once you start to subtract your expenses from your total income, you’ll know exactly what’s left to save or spend on entertainment. If there’s not much left over, you’ll at least have a better picture of where you can cut back.
Budgeting Tips for Single Parents
Online budget tools are one easy way to consolidate your finances. There are several free tools, like the Mint smartphone app, that will put your finances at your fingertips and keep track of all money in and out so you’re never in doubt.
You can also utilize budgeting strategies. One popular method is spending 50% of your income on your necessities, 30% on your wants, and 20% on your savings.
2. Establish Your Emergency Fund
Now that you know where your money needs to go, the next step should be establishing an emergency fund.
Although no one wants to assume the worst, life can throw all sorts of curveballs your way. And that’s especially true with children in the picture. Illnesses, sudden job loss, or a broken arm on the ball field can unexpectedly put you in a difficult situation.
You should aim to have 6-12 months of expenses saved up and make it a goal never to touch this fund. The more you can put in it, the more of a cushion you will have in the event of an emergency.
3. Save Wisely
It’s easy to fall into bad habits out of convenience, and that’s where little expenses can start to add up. The following tips may seem obvious, but if you aren’t doing them already, you might want to.
- Look for coupons in newspapers, magazines, and online for discounts. It might make something you want to buy cheaper or allow you to stock up on necessities like soap.
- Try to reduce your energy costs. Make sure to turn off the lights when you’re not using them, and be conscious of your water usage.
- Incorporate more home-cooked meals. While eating at a restaurant or getting takeout is undoubtedly easier, cooking at home will save you a lot of money in the long run.
4. Tame Your Debt
Debt can be one of the most significant setbacks when trying to save money, and it can be even more challenging if it involves two people.
If you’re still on a shared phone plan or a joint credit card with an ex, start by separating everything. It will be much easier to tackle without worrying about another person in the equation.
Then, you can focus solely on your situation. Based on your budget, you should have a reasonable estimate of how much you owe each month, and you can begin to employ a few techniques to chip away at your debt.
- If you aren’t already utilizing payment plans, you should set them up so you don’t miss any bills and incur unwanted fees.
- Look into debt consolidation, which lets you bundle all your high-interest debts into one simple payment.
- Use the snowball method. Pay the minimum required on all your debts and focus any leftover money on the debt with the highest interest. Once that one is gone, you’ll have extra in the budget to pay toward the next highest one.
5. Venture Into Investing
Investing can be overwhelming for a beginner, but it is one of the best ways to boost your earnings in the long run and prepare for your and your child’s future.
You can start by assessing your risk tolerance. You may not be willing to put too much on the line as a single parent, so safer investments like a high-yield savings account or class-A bonds could be the best choices for your financial goals.
Once you start to have a little bit saved up in different places, it’s smart to track your investments. It will streamline all of your finances into one accessible outlet with simple charts and graphs that help you see your progress.
6. Finance Your Child’s Education and Childcare
Child care is one of the most expensive aspects of being a single parent, but help may be available.
- Some states provide subsidized childcare services or assistance programs to those that are eligible.
- You can also check with your employer, who might offer childcare benefits or FSAs.
- Lastly, some afterschool community programs are low-cost or free.
There are also many options when it comes to college, such as scholarships and financial aid. You may even consider a 529 plan which is a savings account that offers tax advantages on funds used for education.
7. Secure Your Future, Plan for Retirement
It’s never too early to start thinking about saving for your retirement. After all, a part of securing your child’s future is planning for your own so that you do not encumber them when they’re older.
The first step is to estimate how much money you see yourself needing each month when you retire. Will you move into a smaller house in an affordable area, or do you plan to retire somewhere with a higher cost of living?
Once you get an idea of the income you will need, you can start setting aside money when possible, especially after your child moves out and becomes independent.
8. Insure Your Family
As we mentioned earlier, illnesses and injuries can spring out of nowhere. Health insurance for yourself and your child is crucial and helps protect your emergency fund.
You can get low-cost plans for children through government programs like CHIP, HealthCare.gov, and Medicaid.
You also don’t want to skip out on life insurance. Although you may have an agreement with family or friends to care for your child if you should pass, life insurance will give them much-needed additional income.
9. Optimize Your Taxes
As a single parent, you are eligible for tax benefits, credits, and exemptions.
If your child lives with you for six or more months a year, you can file as “Head of Household” and get a higher deduction and better tax rates than simply filing as single.
You can also get a child tax credit for kids under the age of 17, medical expense deductions, and health insurance tax credits.
Trying to research and understand all of the nuances of taxes can get overwhelming, so consult a professional when in doubt.
10. Navigate Financial Aid
There may be government financial aid you can apply for as a single parent. Look into the following programs or something similar in your area:
- Women, Infants, and Children (WIC) or Supplemental Nutrition Assistance Program provide support in getting affordable food.
- Temporary Aid for Needy Families (TANF) provides supplemental cash to those who qualify for up to two years.
- Feeding America runs mobile food banks.
- Single Parent Advocate connects parents with resources for help with everything from afterschool programs to mental health.
You can also find childcare and housing assistance through some of these programs and other non-profits.
Start Preparing Your Families Finances One Step at a Time
Life can be overwhelming sometimes as a single parent, and financial planning might fall by the wayside. The good news is it doesn’t all have to come together overnight.
Start by creating a budget first, and then you can better understand how to allocate your funds and save for the future. Take advantage of online tools and government resources, and stay up to date on assistance programs.
Before you know it, you’ll start to move the needle in the right direction. And nothing feels better than having a little peace of mind that your family is more secure.