Very few people begin their adolescent lives dreaming of being a single parent, but many end up single with a child at one point or another. Raising children alone is unquestionably challenging—emotionally, physically, and financially. Between never having a break and constantly questioning your own decisions, the lifestyle can be draining.
Through clients I have,I have seen first hand, many single parents hit a sort of rhythm that makes them stronger as people, but the financial strain can still be worrisome.
Challenged by the work involved in earning a living and caring for children completely alone, single parents can sometimes feel that they may never break the cycle of living paycheck to paycheck.
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:
1. Analyze Your Expenses
The first step is to take stock of your situation. While this can be frightening for some single parents, it is crucial to your financial success.
You need to consider your fixed costs. How much do you pay for:
- housing
- utilities
- Transportation
- Childcare and after school programs
- Medical expenses
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.
Housing
Depending on your family situation you will need to evaluate the best options for housing.
If you are a newly single parent, you may feel that a minimal disruption to your child’s lifestyle is best. But, sometimes you can’t afford to stay in the same place, so would need to move. 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.
Childcare
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. Also be conscious that in some states, the other biological parent is required to reimburse these expenses as a form of child support, be sure to review this option with your lawyer.
2. Control Spending, Start Saving
One of the hardest parts of being a single parent is controlling your spending. In a stereo-normative two parent relationship, your spouse would contribute at least half or more of your child’s expenses. Riding solo, means also often having a solo income.
If you do receive child support, you will find it is often insufficient on meeting your child’s needs. You need to carefully evaluate where all your money is going. Next, assess areas where you can cut back on other forms of spending. By keeping a diary of your spending for 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 technology this is easy to do, make a google doc or a note on your phone to track it. If you are going through a divorce, you will need to do this anyway for your lawyer. With your spending under control, you can start planning and dreaming for the future.
Financial Planning Begins..
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.
It’s hard in our culture to not frequently go out with your child. Unfortunately, a few visits to Chuck E Cheese or a fast food chain can eventually create a deficit. Set up for yourself the smallest amount of cost inducing outings as possible. 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. It’s also good to check for free outings online, many libraries, schools and parks have events that your children will enjoy.
3. Secure Insurance Protection
Especially as a single parent, you need protection against any possible negative circumstance. While finances may be dismal, it is important to acknowledge 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.
Remember the joy
Providing for a family on your own is a challenge, but it is one that can be met with careful planning. Remember the joy of being a parent when times get hard. Although you may not have wanted to be a single parent, you can still enjoy the journey. Don’t forget to appreciate your time with your little one! It doesn’t take money to make a child happy!
As always, you can consult with me to discuss your current financial situation. Look for future posts on the best ways to save more money and build wealth. Check out my recent post on financial planning.
Thanks for stopping by and I hope you achieve financial success!
