Being a single mom is one of the most challenging jobs on the planet. Nowhere is this more evident than when it comes to taking care of the finances. Managing money is hard enough in a two-income family. As a single mom, those challenges are magnified in many ways, especially if you don’t receive child support from an ex-spouse or have more than one source of income. By following these five money management principles, you can keep your finances in good shape and provide for your family even on a limited income.
Managing cash flow can be one of the toughest jobs for single moms, even when receiving child support from an ex-spouse. Having a budget makes it easier to spend your money wisely while also planning for unexpected expenses.
Creating a budget involves a simple process of identifying how much money you have coming in every month and allocating it to appropriate expenses. Setting a realistic budget, one in which you don’t overspend on a regular basis, requires knowing where and when you spend your money. This requires keeping track of your expenses. Not just the big ones like rent, car payments, groceries, etc., but allof them.
Save all receipts and keep your checkbook and/or online banking account balanced and up to date at all times. It also helps to separate expenses into categories, such as household expenses, medical, clothing, entertainment and other areas. This lets you see which expenses take the biggest bite out of your cash flow, and helps identify frivolous or unnecessary expenditures.
Debt, whether from loans or credit cards, can weigh like an anchor on the single mom budget. Paying it off can also be one of the most difficult steps to take since the money goes out and nothing comes in for it. To make the process easier, formulate a schedule for paying down your debt, starting with the cards or accounts that carry the highest interest rate. Next in order should be the accounts that have the highest balances. Tips for paying down debt include:
Look for ways to “find” extra money to apply to your debt payments. For example, cut down on eating out. Reduce cable TV expenses by limiting the number of channels. Eliminate unnecessary phone expenses, such as extravagant data plans. Avoid impulse buying.When possible, pay more than the minimum payment. This will reduce the amount of interest you end up paying and pay off the debt quicker.Choose one debt to focus on, making the biggest payment you can afford while making minimum payments on any other debts. Once you have paid it off, pick another one to focus one, again paying as much as possible.Don’t get discouraged, even when it takes a long time to pay off your debt. If necessary, start by paying off a low-balance debt to keep you motivated.
Smart money management also requires discipline. One way to develop that discipline is to get in the habit of meeting with yourself once a week to review and update your finances. The key is to write the meeting down on your calendar so you don’t forget. Scheduling it at the same day and time every week will make it easier to conduct the meetings.
Your financial check-in is the time for conducting important financial tasks, including:
Paying any bills that are dueBalancing your checkbook or online banking statementMaking note of any unexpected expensesRecording all recent paymentsReminding yourself of major upcoming expenses you need to plan forReviewing all expenses from the previous week to identify any frivolous or unnecessary ones
As a single mom, it can be tough to set aside the time to perform this important financial activity. But few things will do more to help you keep your finances under control.
Good money management involves planning for the future as well as taking care of today’s financial needs. If you don’t have a savings account, start one. If you already have one, deposit money into it at least once a month. Even if you can only afford $25 or $50 a month, the money will add up over time, providing an important reserve that can come in handy when you least expect it. It also helps to develop the discipline of building good financial habits, and will help increase your net worth over time.
As a single mom, your children depend on you to protect and provide for them today and tomorrow, especially if you’re the sole or primary care provider. But what happens if you die unexpectedly before your children reach adulthood? Who will care for them and how will the guardian pay for the cost of raising your children? Life insurance can provide a lump sum payment that can be used to pay the guardian of your choice for the cost of raising your kids until they become financially independent.
Even if you’re not the primary care provider, you probably provide an important source of financial support for your children. A life insurance policy can replace your income until they come of age, as well as assisting with the cost of their college education.
In most cases, term life insurance offers the simplest and most cost-effective coverage. You pay premiums for a preset period of time, based on how many years you need to cover. The policy pays a lump sum should you die before the term is up. It also provides a guaranteed premium for the length of the policy, making it easy to budget for the monthly premiums.
Be disciplined, spend your money wisely, and practice good financial judgment. You’ll find that making ends meet doesn’t have to be as difficult as it seems.
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