Life is different now. You have recently been through a divorce and are now the single head of a household, which is a huge personal – and financial – responsibility. While you may still be doing many of the same things as before, you now are 100 percent responsible. There is no one to share the myriad responsibilities and decision-making.
This may be all new to you. It is also likely that you are still riding an emotional rollercoaster. Now is a good time to step back and take a deep breath. While many financial challenges lie ahead, understand that you can do this.
Financial Advice For New Single Mothers
What do single mothers have to do differently financially? To achieve financial success, newly single mothers should heed the following advice.
Just say no to credit card debt
Don’t live beyond your means and rack up high-interest credit card debt. This is one of the worst debts to have due to high-interest rates. Credit card debt should be paid off first when prioritizing bills.
Prioritize what is most important.
Take a moment (or longer) to assess your new financial life. Your family needs you to clearly understand how you can make everything work, without sacrificing too many of “the good times.” Review your lifestyle and analyze what changes and/or adaptations need to be made. Prioritize and differentiate between your needs and wants, and those of your family. Make notes. Create lists. Write things down.
Ultimately, let this “prioritization” process guide your budget. Focus on just a few practical lifestyle/financial priorities and learn to make concessions with others.
Get real with what you can afford.
Create a realistic budget. Track your spending over a specific time to see where your money goes. The goal is not to set up an austerity program that is so severe that everyone is unhappy; rather you just need to accurately understand your spending habits so you can manage and track your flow of money in an honest manner. For example, if yoga makes you happy and less stressed overall, look a reasonably-priced studio in your area or do an at-home workout.
Not spending money on yourself (within reason) can be detrimental in the long run. It is fine to put some of the focus on you. Every mom has been told that she needs to take care of herself first, so she has the energy and resources to take care of others. This applies to finances too.
Don’t try to keep up with everyone else.
Even if your lifestyle had been different previously, now is not the time to try to keep up with your neighbors and friends. As we said earlier, your life is different now. The financial decisions you make going forward will be based on a different set of circumstances.
For example, prioritize making mortgage payments and saving for (or taking) one annual family vacation, rather than putting yourself into debt to drive a more expensive car. Even if it seems that’s what everyone else is doing, prioritizing driving the Mercedes instead of keeping up with your everyday bills will only hurt you in the long run.
Manage risk smartly.
Having only one income means it is just that much more important to protect. Obtain life and disability insurance to protect you and your family in the event the unforeseen should happen … because it can. Unfortunately, I have worked with clients who depended exclusively on one income and that person became sick and was out of work for several months.
It was both unfortunate and sad. Purchasing a cost-effective disability policy is a prudent way to safeguard against a potential loss of income.
Develop a plan B.
Planning for the future is an important component of ongoing financial awareness. Many people have asked me what is necessary for an estate plan when you have young children. At the very least set up a will. Should something happen to you, you want to have a say in who will care for your kids and where your assets will go. You do not want to be in a situation where the state determines who the guardian of your children should be – what if that is not aligned with your intent? Get it in writing.
A full estate plan is recommended (including health care proxy and power of attorney), but creating a will is a good, productive first step.
Pay yourself first.
With only one income, it may seem harder to save for retirement, especially if you envision having college educations to pay for, but it is critical to do so. Children can receive financial aid, scholarships, and loans to help pay for school, but those alternatives do not exist for retirement. Put away as much as you can into your retirement savings on a pre-tax basis and make sure to contribute at least as much as your employer matches (it’s free money!).
Don’t try to do everything on your own.
Not having a knowledgeable team of resources on your side can be the biggest disservice possible to yourself. A smart parent – especially a single parent – is aware of what they don’t know and asks for help when she needs it. This includes seeking help with your finances. Work with an advisor who places your interests first to help you make sense of the various aspects of your financial life and empower you to become educated on these topics.
Get referrals for accountants, estate planners, etc., from trusted friends or colleagues who you know have been in a similar situation to what you are facing. Building a support system will make managing finances as a single parent much less overwhelming.
Taking a realistic, proactive financial approach as a single mother is essential to your well-being and that of your family. Following the advice in this article can help you avoid unnecessary anxiety and keep your financial options open as a single parent.