Raising children without a partner can be challenging—emotionally, physically, and financially. Challenged by the work involved in earning a living and caring for children, single parents can sometimes feel that they may never break the cycle of living paycheck to paycheck. But, even if you have a limited income, you may find that simply managing your money better can alleviate some financial problems and allow you to save for the future. Consider the following steps toward becoming a financially savvy single parent:
Analyze Your Expenses
The first step is to take stock of your situation. What are your fixed costs? How much do you pay for housing, utilities, transportation, and childcare? If these expenses alone consume most of your income, leaving you with little money for groceries or discretionary spending, consider whether some of these costs could be reduced or eliminated entirely.
If your mortgage, property taxes, and utility bills are more than you can reasonably handle, selling the house and moving to a smaller place may be your best option. It may be difficult for you and your children to leave the family home, but the prospect of having more money to spend on other things may make it worth it. Similarly, it may make sense to trade in that late-model sport utility vehicle for a more fuel-efficient or used vehicle.
If you need childcare while you are at work, there may be ways to reduce your costs. Daycare centers are often more expensive than programs offered by local religious institutions or YMCAs. If your children only require after-school care, a stay-at-home parent may be willing to help out in exchange for your babysitting services at other times. You may also want to speak to your employer about working a flexible schedule or doing some of your work at home. If you do pay for childcare, be sure to claim all available tax deductions and credits.
Control Spending, Start Saving
Next, assess areas where you can cut back on other forms of spending. By keeping a diary of all expenditures over the course of a month, you can identify some fat that could be trimmed from your budget. Simply replacing takeout with fresh, but easy to prepare, meals can save a bundle.
With your spending under control, you can start planning for the future. After establishing a fund for emergencies, think about your retirement and education goals. If your workplace offers a 401(k) plan, try to contribute at least enough to take advantage of your employer match. You may also want to consider putting money into an IRA. If paying for your children’s college education—or your own—is a priority, look into several tax-advantaged accounts that can help you save efficiently.
Secure Insurance Protection
While finances may continue to be tight, it is important not to overlook the need for adequate health, life, and disability insurance. How would your children cope if you were no longer able to support them? To start, all families need health insurance. If you do not receive benefits through your employer, look into a high-deductible catastrophic policy that covers the costs of serious illness or hospitalization. Depending on your income, your children may be eligible for public health-insurance programs. Note that in 2014, the Affordable Care Act (ACA) started offering—through insurance exchanges—health insurance to family members and individuals across the U.S. who lack coverage.
Consider also the protection offered by life and disability income insurance. Life insurance can offer funds that can be used to maintain your family’s standard of living in the event of your death, and disability income insurance can replace a portion of your income if you sustain a sickness or injury that prevents you from working.
Despite your efforts to cut costs and adhere to a budget, you may still find yourself burdened with credit card debt. If possible, move the debt from higher-interest to lower-interest credit cards. Then, develop a strategy to pay down debt gradually and within your budget. In the meantime, avoid the temptation to take on new debt.
Sticking to a budget can sometimes feel like an exercise in deprivation, but it doesn’t have to be if you set aside money for a few treats, like a weekly family pizza night. Even if you can only contribute small amounts, create a “fun fund” to be used for a vacation or a trip to the amusement park. Providing for a family on your own is a challenge, but it is one that can be met with careful planning.
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