If you've recently become a single parent due to divorce, loss of a spouse or other life circumstance, you are now one of 13.7 million single parents in the United States today, according to the 2018 census data. If this major life change has caused a strain in your personal life, it doesn't mean your finances have to suffer. While being a single parent can be stressful, how you secure yourself financially will teach your children how to manage their own money in the future.
Here are four ways to maintain control of your money as you start to fly solo:
Create a budget and have a cash flow plan.
Keeping a budget is probably the most important thing you can do financially as a single parent. Knowing your household income and recurring expenses is imperative, so you know where your money is going at all times. Setting up automatic bill pay is a great way to stay current on bills and avoid late fees. By staying ahead, you'll know if you can swing that summer vacation without putting your family in a financial crunch.
Also, plan ahead by projecting future income. If you're currently receiving alimony or child support, remember that it doesn't last forever. If those things change, you'll need to adjust by making up for lost income with other sources of income, or a lifestyle change. Our partners at GreenPath provide free access to money management and financial education services such as budgeting, debt repayment and credit counseling. You can also use our Financial Fitness Workbook to help you achieve your financial goals.
Build a safety net.
As a single parent it is crucial to build a financial safety net in the event that your job falls through or you become faced with a medical emergency. A good rule of thumb is to have six months' worth of living expenses saved up in a separate account from one you use daily, like a savings account or low risk investment account. You can also save your family hundreds of dollars a year by taking advantage of benefits provided by your employer such as your company's wellness plan or flexible spending accounts.
Prioritize retirement savings over education.
This one may be a hard pill to swallow, but it's important that you put your money first. Your child can go to college with grants, scholarships or loans, but your income and earning capacity will diminish overtime. Make sure you save what you can for your retirement.
Estate plan.
Having life insurance, wills and trusts and naming guardians for your children in the case of your death is critical for a single parent. Disability insurance is also important to have if you are the only breadwinner in the household. Don't forget to explore the many options available through Telhio Credit Union for your estate planning needs.
