Jun 11, 2019
Finances are a major source of anxiety for single parents, and more specifically, single mums. There are statistically more single mums than dads, as women are usually the primary caregivers for very young children and earn less in comparison with men.
In addition to the social challenges and emotional impact of losing a partner, single parents may find themselves struggling to maintain a high quality of life for their children.
If you’re also a single parent then the following tips will help you manage your finances and avoid stress.
1. Tidy up your finances soon after the loss of a partner
Losing a partner in divorce, separation or death can leave you reeling from the sudden change. Even so, it’s crucial that you gather your wits as soon as possible so that you can assess the financial impact this change will have on your life. This will help you get re-established financially and minimise the economic impact on your children. Never assume the cash will flow the same way it always has for your family.
Take stock of any debts or payments owed on behalf of your partner and re-adjust any bank accounts that were previously shared by both of you. You may need to take out more insurance now that you don’t have a second income to rely on. Visit an experienced financial adviser to get your finances in line and figure out what steps you need to take to re-organise.
2. Budget, budget, budget
Budgeting is good for everyone. It can help you control your finances and grow your wealth to meet your goals. More importantly, however, budgeting is a critical skill for anyone with a single income and depedants. Having a budget in place will ensure that your family’s basic needs are covered and that you stay out of debt.
Make a list of all of your current expenses to see where your money is going. Divide them up into categories and see if there are any areas where you can cut back (eating out, for example). Determine how much income you have at your disposal each month and allocate the appropriate amount to each category.
The key to budgeting is to be as specific as possible. Don’t leave out a single expense! Account for every cent of your income to make sure it’s being put to good use, including a budgeted monthly allotment for savings. This will give you more control over your finances and help you have peace of mind.
3. Save what you can - every little bit counts
You might not have much left over after the bills are paid, but don’t underestimate how far even one spare dollar can go. Instead of splurging on a brand name item, buy a cheaper version of that item and put that extra dollar in your savings fund.
Those extra dollars will eventually add up and come in handy when you really need the funds, especially in an emergency. As a single parent, you don’t have another financially-responsible partner to lean on in times of trouble. Diligently maintaining small savings can not only support for you when unexpected expenses arise, it could also help you invest in your property, cover school fees or treat the family to a holiday.
What if you really truly can’t find a single spare dollar to save in your emergency fund? It may not be practical for you to work a lot if you’re already busy as the primary caregiver for your children, but there are other things you can do.
Maybe you can start up a small online side business or ask for some temporary overtime hours at work. Maybe you have some furniture or clothing or electronics you can sell. These are just a few ways you can earn a few extra dollars to get your savings started.
Despite feeling like you’re living from paycheck to paycheck, it is still possible for you to save up and plan for a more stable financial future for you and your children. Start now by paying yourself first. This means factoring savings deposits into your budget even if it isn’t much. Remember: every little bit counts when you’re a single parent!
4. Don’t depend on child support payments
Child support payments aren’t always reliable so they shouldn’t be viewed as your primary source of income. Instead, view the payments you may be receiving as a bonus. Put the money in your savings account or emergency fund or use it to pay off debts or buy your children the occasion treat. Make sure you have more reliable ways to cover your family’s basic needs.
5. Reserve credit card for emergencies only
It’s tempting to rely on credit in times when income is meagre, but you will only incur more debt and financial stress from the accumulated interest. Keep a card or two on hand for use in a true emergency but stay away from borrowed funds at other times.
6. Take advantage of government benefits
The government offers various forms of support to single-parent families. Contact Centrelink to find out what benefits you qualify for in your situation since these can vary with your age, the age of your children and your current assets and income.
Find out what kind of assistance you qualify for as soon as possible since this income will affect your budget and other financial plans.
Some government-funded financial support programs include:
- Parenting Payment
- Family Tax Benefit Part A & B
- Child Care Subsidy
- Child Support (for managing payments if you’re not in a position to independently arrange with ex)
- Rent Assistance
7. Plan ahead for new romantic relationships
Are you interested in eventually partnering up again with someone new and settling down? This will have another major impact on your finances. Don’t get caught in the chaos of trying to cut old financial ties while forging new ones. Be prepared. Have honest money talks with a potential partner no matter how uncomfortable it may seem. It will actually help minimise tension when you are both on the same page regarding money goals, plans, priorities and budgets.
Keep in mind, too, that having a new income source will also impact the government benefits you may currently qualify for.
8. Think long-term
When you’re scrounging for pennies to pay for socks and cereal and noodles, it doesn’t sound feasible to go back to uni or start investing. But a wise long-term financial plan can boost your earning capacity in the future. A loan or government funding or assistance from a relative can help you get a foot in the investment market or help you earn a degree that will secure you a higher paying job.
You don’t have to be stuck in the cycle of never having enough money. Even if it means more short-term sacrifices, you can invest in a secure financial future for you and your children.
When you're earning a single income, getting financial advice is crucial. A financial adviser can guide you out of lean times, and set you up with a wealth plan that supports you and your family. You are sure to benefit, whatever your circumstances.
Written by Ben Calder, Private Client Adviser at Calder Wealth Management.
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