Single Mom Financial Planning

While many single moms find solace and freedom in single motherhood, we can’t ignore that total independence does come with its challenges. One of the biggest obstacles to navigate as a single mom can be financial planning. Everyone wants financial freedom, but to achieve this worthy goal, careful long and short-term planning is essential.

Developing a good financial plan depends on many factors. Among those factors are level of income, level of disposable income, your stage of life, your debt load and your long and short-term goals. Debt reduction should be the primary focus if you are working to restore your finances. Divorce, separation, downsizing and even simply graduating from college can put your finances in a tailspin. The best preparation is to have a strategic financial plan in place so that you can weather any future storms of economic turmoil.

Blueprint for Single Mom Success

The first step in single mom financial planning is to assess your current financial situation. Create three separate categories: Needs, Wants, and Desires. This will give you a clearer idea of which things take priority over others. Housing expenses such as rent, utilities and student loans are unavoidable and should be top priority. Wants, such as changing the wallpaper the kitchen, getting the kids that Xbox or those Godiva chocolates can wait while you get your finances in order. Desires would include the new luxury cruise you’ve been dying to take, the brand new sports car you’ve had your eye on or even the ultra cool game-room for the kids. This categorized list will help you to create a blueprint to take you where you want to go financially. Over the course of time, you will have to periodically deviate from your well laid financial plan.

Paying Off Debt

One starting point that is generally good for all single moms is debt reduction. If your Macy’s card has your paycheck in a headlock or Visa is filling up your caller id, this should be your primary focus. Even if you haven’t begun saving for retirement, it is a better plan to pay off debt since debt interest rates are higher and debt grows faster than savings.

Credit cards derail even the best laid financial plans. To reign in this unsecured debt, focus on paying more than the minimum on each card. Also, pay as much as you can on your highest interest credit card since it is the fastest growing balance. Try to avoid late fees as all costs. These are dollars that can go toward paying down balances.

Saving for an Emergency

You often hear of the need to have an emergency fund. While it is not always easy to save 6 – 9 months of living expenses, having a rainy day fund is important nonetheless. The ups and downs of the economy and rising prices can financially devastate a single mom who finds herself unemployed or underemployed. Being unprepared for an interruption in income only adds fuel to the fire.

Calculate 6 – 9 months of expenses for your household and chip away at it a little at a time. There is no need to feel overwhelmed. Consistent saving will help you reach your goal sooner than you think. One way to do this without having to think about it every paycheck. Have your savings deducted directly from your paycheck or bank account and placed in a separate emergency fund. Make sure that you can easily access the account in an emergency.

Long-term Goals

Retirement should be a number one priority in your long-term goals category. The going price tag for a comfortable retirement 10 years ago was one million dollars. If you are a later Generation X’er or a Generation Y’er, then that price tag could easily double by the time you are at retirement age. The way to get ahead of this growth curve is to start saving now so that your retirement fund can grow using compounding interest.

Some common retirement vehicles include the 401k, IRA, Roth IRA and Mutual Funds. Keoghs or SIMPLEs are a good bet for the self implied and small business owners. Whatever the case may be, be sure to consult with a financial planner to determine the most appropriate retirement avenue for you.

Financial planning can be hard work for single parent homes, especially. One way to take the sting out of saving for short and long-term goals is to put it on automatic pilot. Many employers allow you to split your earnings between two or three accounts. If you take advantage of this option, you won’t ever have to worry about being tempted by the money burning a hole in your pocket. Also, take advantage of programs offered by your employer. Don’t overlook tuition reimbursement options and 401k matches as this can offset educational expenses as well as double your retirement contributions in some cases.

Some employers also have scholarship opportunities for the children of their employees so be sure to investigate every benefit for which you are eligible. In addition, consider placing some of your tax refund directly into your emergency fund so that it will grow faster.

Getting your financial plan in order doesn’t have to be a nightmare. Writing down a plan and sticking to it will make things much easier. Once it become routine, you won’t give it a second thought. Now that you have the steps to efficiently manage your finances, the next step is to grow your income so that you have more to manage. Earn from home with Zamzuu. Get your own online shopping portal with hundreds of online stores and start earning today.

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