If you are a single parent then you have to bear a lot of responsibilities on your shoulders. As a single parent, you are the caregiver of your family and you need to maintain a budget plan for your monthly expenses. From paying for clothes to putting a roof over their child’s head all the responsibilities need to be managed by the single parent. Remember that you will also need to manage your child’s educational expenses also.
You may find it challenging to meet only your needs and avoid things like paying off debt or saving for the future. There is a way for single moms or dads to maintain a monthly budget. If you could use a little help in the budget department, we have some financial advice for single moms and dads to help you plan for your income and future.
Monthly Budget Tips for Single Moms
Budget is a plan for your money. While there are many budgeting methods to choose from, the idea is the same – plan where your money is going.
Winning single mom budget will help you avoid financial stress and get peace of mind instead. After tracking your expenses, you may find that you have to stop shopping to pay for other necessities or watch weekly ads to save money on groceries. Figuring out how to budget with one income is no hassle. You can also make it fun by trying the challenge of saving money to go with your new budget. The key is finding the right budgeting method and ways to streamline your savings.
9 Financial tips for single mothers
1. Minimize monthly budget
The initial step to making the monthly financial management path better is to figure out where you currently stand and set up your monthly budget. Observe your financial statements of past for the several months and make the analysis of how much you can spend for a monthly expense including fixed expenses like your monthly bill, house taxes, etc and your variable expenses like clothing, grocery, medical, child schooling expenses, food, entertainment, etc.
Ideally, you want your monthly inflow to be larger than the outflow — that way, you have money left over for savings and paying off debt. The budget rule ratio is 50/30/20 which is divided your income into 3 ratios of your income. 50 percent for needs, 30 percent for wants, and 20 percent for savings and paying off debts.
2. Divide the expense
Experiment yourself, if you find that you are unable to manage monthly expenses and the situation gets worse then divide the expenditure into sections. You might want to take a closer look at your expense list next and start looking for ways to save money.
A major single-parent budgeting step is to revamp your recurring bills to see if there are any ways to reduce them. For example, you may be able to switch to a cheaper cell phone. Or, maybe you can find a better deal on car insurance or give up your cable subscription. You can also look for ways to cut down on everyday expenses, such as breaking the coffee shop habit in the morning, cooking more often and being less involved, and taking care of yourself while you shop for food and other household items.
3. Start a savings plan
Saving money can take time, but if you get your household budget in order, you can start thinking about withdrawing even a small amount regularly. Think about what you want to save for and how much you’ll need, being realistic and giving yourself plenty of time. Consider options like asking your employer to split your salary payments so that some of it goes into a separate savings account. Having a savings goal will give you something to aim for and help you plan for the long term.
4. Prioritizing Emergency Funding
An emergency fund is essentially money that is set aside to cover life’s unforeseen events. The money will allow you to live for a few months in case you have to lose your job or pay for something unexpected that comes along without going into debt.
Think of it as an insurance policy. Instead of paying a premium to a company, you are giving yourself money that you can use at a later date. Cash can be accessed quickly and easily in case an unfortunate event occurs.
5. Paying Off Your Credit Cards
Eliminating even a single high-interest credit card debt can make a significant difference to your monthly cash flow. When budgeting for a single mom (or dad), it can be a good idea to leave room for credit card payments that exceed the minimum. You may want to start with the loan that has interest first because borrowing from those creditors is going to cost you the most money.
However, if you are likely to be disappointed because it is taking a long time to pay off that loan, you can start with the lowest balance loan. Paying off some small debt can motivate you to move forward. Whichever loan you target, you can pay more than the minimum payment on that loan, while continuing to make minimum payments on the others, with the goal of eliminating them one by one.
6. Protect yourself and your family
When you are managing your finances, you also need to think about your safety and that of your children in the long term. It’s even harder to cover financial stocks as a single parent, so it’s important to be prepared for anything that may arise. If something happens to you and you can’t earn your regular income, consider taking an insurance cover like income protection, life and trauma insurance.
Often these insurances can be paid for through your super so that they do not affect your cash flow. It is also a good idea for single parents to make a will or update an old will to ensure that their money and assets go into the right hands in a worst-case scenario.
7. Automating Your Finances
As a single parent, you can be overly busy, which makes it easy to be late paying the bills because you forgot. Automating your finances can simplify your budget (and your life) and help ensure that you don’t have to pay expensive fees or interest charges for delayed payments. A good place to start is to set up Autopay for all your recurring bills through your service providers or through your bank. That way you don’t have to stay on top of due dates and remember to make every payment. Automating can also be a good idea when it comes to savings.
Often referred to as “paying yourself first,” you might want to set up an automatic transfer of money from your checking to your savings account on the same day each month, perhaps right after your paycheck is deposited. This prevents you from spending those dollars or having to remember to transfer the funds to your savings later.
8. Increasing Your Income
If your budget is too tight even after cutting expenses, you can look for ways to increase your income. It can help take the stress out of budgeting as a single mom or dad.
There are many ways in which you can increase your income. For starters, if you’ve been at your job for a while and are doing well, you can consider asking for a pay increase. It can be helpful to research what the industry average salary is for your position, along with your experience, to know how much you should be asking. Another way to increase your income is by walking the dogs, becoming a virtual assistant, doing freelance work in your profession, selling your craft, becoming a tutor, taking care of other people’s children, or teaching music.
9. Taking Advantage of Tax Breaks
Did you know that as a single parent you are entitled to the following tax benefits?
Filing as the “head of household” as opposed to “single” can give you a higher standard deduction. In 2020, it is $18,650.
Eligible single parents can receive up to $2,000 per child with the Child Tax Credit.
Do you pay for childcare? If so, you should be able to secure child and dependent care credit. FYI, if your child is under the age of 13, you can get a credit of up to 35% of your childcare expenses.
Single working parents with low to moderate income are eligible for the Earned Income Tax Credit.
Just be aware that if you share joint custody, only one parent can claim your child as a dependent. Knowing this will certainly prevent you from getting into trouble with the IRS. And, nobody wants that.
Partner at LiteFin