Everyone needs a set of financial management tips that will keep them from feeling stressed about their finances. If your household is not following a system that will help you manage your money, you are in danger of making the wrong financial decisions. You might think that you still have enough money as you spend on a daily basis – when in fact, you are already short. That means you will end up in debt at the end of the month.
If there is a particular household that is in need of financial management, it is those led by single parents. According to statistics, of all the children under the age of 18, 20 million of them are raised by single parents. That means there are millions of people who have to carry the task and responsibility of raising a child or children on their own.
What makes this hard is the fact that you have no one to share the load with. You need to be both father and mother to your kids. The responsibility to financially provide for the children is yours alone. The single-income household will give you limited finances. And just because you are a single parent, that does not mean the cost will be lower. In fact, it might even be bigger because they have to rely on professional child care so they can continue to work while someone else takes care of their child.
This is why single parents need financial management tips. They have to make sure that their finances will not get out of control. With everything that is going on in their lives, managing their finances can be a bit overwhelming and might end up being ignored. And we all know that it can be a huge mistake.
Tips for single parents managing their money
Fortunately, there are several financial management tips that can specifically help single parents manage their money well. According to data from the US Census Bureau, not all single parents are in poverty. In fact, of all the single mothers, 53.2% work full-time while 22.8% work part-time. And 85% of single fathers are also employed. But while the majority have a steady income coming in, it is still a fact that single-parent households are twice as likely to be one. Based on statistics, 30.4% of single mothers and 18.8% of single fathers live in poverty. While they can expect to receive help from the government, it is usually not enough for them.
But before single parents turn to the government for help, it is important for them to look into their own financial capabilities first. With a steady income coming in, they do not have to be in danger of living in poverty. Once they learn how to manage their money, they can start living within, or even below their means.
Here are some of the financial management tips that single parents can definitely benefit from.
Create a budget plan
This budget plan will help you maintain full control over your finances. It will help you see both your income and expenses. Knowing both will help you make better financial decisions. You simply have to make sure that you will not go beyond your income. All your expenses combined should never exceed your income because that would mean the excess is spent with debt. Spending below your income is usually a good idea because it will give you extra money to save for an emergency – which will help secure your finances. Your budget plan will allow you to identify the expenses that you need to cut back on if you are spending too much on a particular spending.
Regularly check your budget
As the kids grow up and their needs change, your priorities will change as well. When they were young, you had to pay for childcare. But after a few years, they will start going to school and that is where your expenses will focus on. Your budget should adapt to these changes. Set up a system that will prompt when you should look into your budget plan to see if it still applies to your current financial situation.
Monitor your credit
It is okay to use credit. After all, you need this if you want to maintain a good credit score. However, you need to be careful with it. Make sure you do not borrow beyond what you can afford to pay back. Also, use credit only when necessary. If you want to use a credit card to buy groceries so you can take advantage of the rewards, make sure this is included in your budget plan. That way, you can pay your card in full when the billing comes in.
Monitoring your credit use can be done by downloading your credit report to look at the information within. You get three free credit reports each year – one from each of the major credit bureaus. You can get a copy through the Annual Credit Report website.
Learn to say NO
This might seem unusual compared to the other financial management tips. However, you need to learn how to say NO – even if it is directed towards your kids. You need to be honest with your financial situation. Some parents will hesitate to include their kids when they are financially struggling. Sometimes, this will do more harm than good. Being honest with what you can or cannot afford will help make your kids more conscious of their finances. This is a great way to raise them as financially responsible individuals.
How to secure your finances
Probably one of the most important financial management tips that single parents should work on is their financial security. Compared to a two-parent household, you are probably more in need of this. According to a study done in Canada, single fathers are more prone to premature death than single mothers or couples. What makes it dangerous, and let us include the single mothers here too, is the fact that they are the lone parent and main provider for the family. For a two-parent household, when one passes on, the other can take up the burden of raising the kids and providing for the family. If the single parent dies, the kids are left with nobody to help them.
This is the main reason why single parents should seriously work on their financial security. There are a couple of things that they should work on.
Have a plan for emergencies
To have a secure financial future, you need to make sure you have a plan in place for emergencies. This is especially true when you are the only adult at home. The younger the kids are, the greater the need for an emergency plan. This is also referred to as a will. If something happens to you, make sure your kids know what to do. This will tells everyone what will happen in the event of your premature death. For instance, who will take care of your kids and who will receive your assets.
The same can also be useful when you are left unable to work to support yourself and your kids. Having a will ensures that you and your kids will be taken care of. Make sure your kids know who to call and where to go. Making a mistake during this time might lead to more problems that will cost you money.
Build your emergency fund
Apart from the emergency plan, you also need to be financially prepared. Have a reserve fund that you can rely on in case you are suddenly unable to work for a living. Or, this can be used to get your kids the medical attention that will help save their lives. Building your emergency fund will not happen overnight. This is why you have to start saving up for it as early as you can. Contribute as much as you can so you can stay secure. Failure to save up for this could also lead you into debt. Being prepared with this emergency fund will definitely benefit you in more ways than you know. Make sure you put this in a separate account so you will not be tempted to use it.
Save up for retirement
This is one of the financial management tips that is probably hard to implement. Single parents take their responsibilities seriously – especially when their kids are involved. However, you have to realize that in order to take care of them, you need to take care of yourself as well. That includes your financial future. While you have to pay for what your children need, you should also save up for your retirement. You have to save as much as you can. But even if it is a small amount, keep saving. You want to take advantage of the compound interest on your retirement fund. And if your employer offers to match your contributions, you have to grab this as well.
You may think that this is selfish of you – but in truth, it is not. By making sure your financial future is secure, you are making sure you remain independent even when you get older. You will not rely on your kids to give you money when you retire. This is a direct way of securing your finances for the future and an indirect way of making sure you are not a financial burden to your kids.