As a single parent, you bear a multitude of responsibilities. From working, grocery shopping, cooking, doing laundry, to ensuring your children go to school on time, you play roles of a doctor, driver, coach, and tutor—often all at once.
Yet, the economic burden falls solely on your shoulders. And this perhaps is your most crucial role. However, striving to create stable financial conditions might mean missing out on shared joyful experiences with your children, such as weekend trips to amusement parks or camping.
In case of mistakes, you might struggle to meet your children’s basic needs like food, clothing, and housing—something no parent wants for their child.
Yes, it may seem like you carry the weight of the world on your shoulders. And truth be told, you do. But by applying the following nine money management tips, you might be able to sustain your household without losing sleep over financial issues.
Why bother with budgeting? Because by deducting your expenses from your income, you gain insights into where your money goes. This way, you can cut down on unnecessary spending, live within your means, and devise and achieve your financial goals.
However, there’s no one-size-fits-all budget. Therefore, you might need to experiment with different budgeting methods until you find the one that suits you best. Some common budgeting methods include:
• Envelope or cash system: Allocate an envelope for each expense and put the necessary funds in each envelope to prevent overspending.
• 50/30/20 budget: Divide your income into three categories: 50% for essentials, 30% for wants, and 20% for savings.
• Zero-based budgeting: Popularized by Dave Ramsey, this method involves allocating every dollar while budgeting.
• Reverse budgeting method: Ideal when you have fixed expenses, deduct them from your monthly income.
To simplify budgeting without consuming too much of your limited time, consider using free budgeting tools. More importantly, doing so can help you stay on track.
With a budget in place, you should have a clear understanding of your debt. Based on this, you can devise a plan to eliminate it.
Why eliminate debt? Because debt not only adds stress but can also jeopardize your family’s financial well-being.
While it requires some calculation and discipline, you can repay your debts by:
• Creating a plan to avoid late fees if you can’t make timely payments.
• Consolidating your debts into a single payment through a debt consolidation plan.
• Addressing shared debts. If you share a phone plan or credit card with your ex-partner, ensure each of you manages their share separately.
• Using tools like Truebill, Trim, or Billshark to manage bills or subscriptions.
• Opting for second-hand or generic items to cut expenses. Look for free and fun activities for your family, such as my local zoo offering free admission. Utilize coupons, opt for lunch outings instead of dinners, and be mindful of miscellaneous expenses like daily coffee shop visits.
With the surplus from these measures, you can reduce debt. Start by tackling the debt with the highest interest rates and gradually work your way down. Once you clear all debts, channel that money into an emergency fund, college savings account, or retirement fund.
If you’ve repaid your debt and maintained a balanced budget, congratulations! However, if you wish to save more money, consider increasing your income and net worth.
It’s commonly advised to diversify your income sources. Yet, realistically, juggling a second job as a single parent might not be feasible. Apart from covering childcare costs, you might hardly have time to truly enjoy moments with your children.
One way to address this challenge is to find a home-based side hustle. For instance, you could work as a virtual assistant or customer service agent. Utilize your existing skills; if you’re adept at coding, consider designing apps or websites. You could also sell homemade products on platforms like Etsy.
Another suggestion is to enhance your marketable skills in your current position. By taking courses or earning certifications, you position yourself better for salary increments or promotions.
Additionally, stash some money in mutual funds to earn through interest. Remember, diversification is key in investments.
Even if you can shoulder financial responsibilities, stick to a budget. American parents, single ones included, continue to face significant economic pressures. The GoFundMe team highlights, “Without resources like paid maternity leave, universal healthcare, and pre-K programs, raising children is quickly putting single parents on the brink of financial hardship.” Given stagnant wages and unforeseen emergencies, single parents may occasionally need a lifeline.
If you find yourself in such a situation, you can seek support from the following government agencies:
• Women, Infants, and Children (WIC)
• National School Lunch Program
• Summer Food Service Program
• Supplemental Nutrition Assistance Program (SNAP)
• Emergency Food Assistance Program
• Temporary Assistance for Needy Families (TANF)
• Child Care Assistance Program (CCAP)
• Medicare
• Medicaid
• Low Income Home Energy Assistance Program (LIHEAP)
• Federal Government Pro Bono Program
• Head Start
• Child Care Tax Credit
• Insure Kids Now
You might also be eligible for scholarships and grants from organizations like:
• Pell Grants
• Teach Grants
• PeaChic Grants
• Huggies Mominspired Grant Program
• Women’s Independence Scholarship (WISC)
• Global Fund for Women
Reach out to non-profit organizations like Community Action Organizations, No Kid Hungry, and American Red Cross for additional support. For debt and mortgage payment advice, consider contacting GreenPath Debt Solutions. You can also turn to parents, relatives, and friends for guidance.
As a single parent, are you aware of the tax benefits available to you?
• Filing as a “head of household” rather than “single” can offer higher standard deductions. In 2020, this stood at $18,650.
• Eligible single parents can claim a Child Tax Credit of $2,000 per child.
• Do you pay for child care? If so, you should qualify for the Child and Dependent Care Credit. Not to mention, if your child is under 13, you may receive up to a 35% credit for child care expenses.
• Low to moderate-income single parents qualify for income tax credits.
However, note that if both parents share custody of a child, only one parent can claim the child as a dependent. Understanding this point is crucial to avoid IRS complications. After all, no one wants that.
While you aim to provide the best for your children, you also don’t want to drown in debt while doing so.
Sometimes, your children might not understand your actions. But be honest with them and take this opportunity to educate them about money and financial planning. Explain the difference between wants and needs, and how to stay within a monthly budget.
From personal experience, I’ve always believed less is more.
My family used to go on vacation only once a year. I used to envy friends who traveled multiple times a year. Looking back, I cherish those vacations as each one remains vivid in my memory. It has made me appreciate what we have, even if it doesn’t compare to what others have.
You might wish to share your children’s photos and moments with friends and family through social media, which is a straightforward way to do so.
While this may not be inherently problematic, consider reducing your time on these platforms, as it could lead to increased spending.
Various factors contribute to this, such as targeted ads and keeping up with others’ consumption habits. For instance, 57% of millennials have splurged money unplanned due to social media content.
In fact, researchers from Columbia University and the University of Pittsburgh found that prolonged social media usage diminishes self-control online. Moreover, individuals spending more time on “powerful” networks like Facebook tend to have higher credit card debts.
“Of course, this doesn’t mean using social media will make you go into debt, or that you should delete your account,” wrote Kendall Little from Bankrate. “Just be mindful of the time you spend scrolling, liking, and sharing.” Track your social media usage to “limit yourself and stick to it.”
“Most states legally mandate you to purchase auto insurance, and mortgage lenders insist you purchase home insurance,” noted Emma Johnson for Haven Life insurance company. “Don’t overlook disability insurance, and never skimp on life insurance—no matter what.”
To be fair, the reason many single parents lack life insurance is understandable. Johnson stated, “This adds another expense in a monthly budget that is usually already stretched thin.” Contemplating death and planning for it, such as who will care for your children in your absence, is a daunting thought.
“But the seriousness of the situation means you absolutely need to have life insurance,” she added. “Even if you believe your kids will be well taken care of by their dad, or your sister or mom, there are a lot of financial questions in your absence.” These include:
• The new guardian might need a larger home.
• The other parent might need additional child care services.
• Costs for extracurricular activities, summer camps, and, of course, higher education.
• Assisting your adult children in buying their first house or funding their wedding costs.
Moreover, ensure your insurance policies are up-to-date. A lapsed policy doesn’t just mean no coverage; it might require you to bear costs, face legal consequences, and pay higher premiums.
If your finances are in order, consider a long-term financial plan. For parents, this includes their children’s education and your retirement livelihood.
If you can’t balance both your children’s education and retirement simultaneously, prioritize retirement. While it might sound selfish, children can apply for student loans or scholarships, but there are no such options for retirement.
If you haven’t already, start saving through your employer-sponsored 401(k) plan, hoping for employer matching contributions. You could also set up an individual retirement account. Even starting with a modest amount like $50 per month can be better than nothing.
Once you have a retirement fund, open a savings account for your children’s education. Choose between ESA (Education Savings Account) and 529 college savings plans. Notably, both offer tax advantages.