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Being a single parent can be a major life stressor, especially when it comes to your finances. Many single parents find themselves solely responsible for all household expenses for the first time. This new financial responsibility can be stressful and overwhelming.
The good news is that you can take control of your finances as a single parent. With some planning, budgeting, and financial goal-setting, you can manage your money effectively. It takes time and discipline, but you can achieve financial stability for your family’s future.
In this comprehensive guide, we’ll walk through the key steps every single parent needs to take to manage their finances and get out of debt. You’ll learn how to:
- Evaluate your current financial status
- Build a realistic monthly budget
- Strategically pay down debt
- Grow your income
- Safeguard your family financially
- Plan for long-term goals
Follow this financial advice to empower yourself and establish firm financial footing as a single parent.
Key Takeaways
- Assess your income, expenses, assets, liabilities, and net worth to understand your current financial situation
- Create a detailed monthly budget tracking all recurring and variable costs
- Focus on paying off high interest debts first while making minimum payments on others
- Look for ways to increase your income through promotions, side hustles, and selling unused items
- Review insurance needs, start an emergency fund, and check credit reports to protect your family
- Contribute to retirement and education savings accounts to plan for the future
Evaluate Your Current Financial Status
The first step to getting your finances on track is to understand your current financial situation clearly. This involves tracking your income, expenses, assets, liabilities, and overall net worth.
Track Income Sources
Make a list of all your current income sources and add up the totals. Be sure to include:
- Employment income
- Child support
- Government assistance (if applicable)
- Investment income
- Any other income
If your income varies month to month, calculate your average monthly income over the past 3-6 months. Know exactly how much is coming in each month.
Document Recurring Expenses
Next, record all of your fixed monthly expenses like:
- Housing (rent/mortgage)
- Car payment
- Insurance premiums
- Child care
- Debt payments
- Utilities
- Phone/internet
- Subscriptions
- Groceries
- Transportation
- Health care
- Child support
Track variable expenses as well, like dining out, entertainment, clothing, etc. Documenting every dollar spent gives you clarity on where your money is going.
Calculate Net Worth
Net worth is your assets minus your liabilities. Add up the value of your assets:
- Savings accounts
- Investment accounts
- Retirement accounts
- Home equity
- Vehicles
- Other property
Then total your liabilities:
- Mortgage
- Student loans
- Credit card balances
- Personal loans
- Auto loans
- Medical debt
- Other outstanding debts
Subtract your liabilities from your assets to get your overall net worth.
With all of these numbers in hand, you’ll have a complete picture of your financial situation as a single parent.
Build a Realistic Monthly Budget
Once you know exactly how much is coming in and going out each month, it’s time to construct a realistic budget.
A budget is a plan for how to allocate your income to cover necessary expenses, financial obligations, and savings goals. The 50/30/20 budget is one popular approach.
Identify Fixed vs. Variable Costs
Fixed costs stay the same each month, like:
- Rent/mortgage
- Car payment
- Insurance
- Debt payments
- Child support
Variable costs fluctuate, like:
- Utilities
- Gasoline
- Groceries
- Dining out
- Entertainment
- Clothing
- Miscellaneous purchases
When budgeting, be sure to separate fixed and variable costs.
Look for Areas to Reduce Spending
Analyze your variable spending to identify areas where you may be able to reduce spending, such as:
- Dining out less frequently
- Cutting back on shopping trips
- Finding free entertainment options
- Driving less to save on gas
- Renegotiating cell phone and internet bills
- Canceling unused subscriptions
Even small cuts add up over time.
Automate Savings Contributions
One of the best things you can do is automate contributions from each paycheck directly into savings accounts for:
- Emergency fund
- Retirement
- Your child’s college fund
This “pay yourself first” approach helps ensure you save consistently.
Use Budgeting Tools and Apps
Take advantage of free budgeting apps like Mint, YNAB, EveryDollar, and others that sync with accounts, categorize spending, and provide reporting. These tools make sticking to a monthly budget much easier to maintain.
Tackle Debt Strategically
For single parents struggling with high amounts of debt, pay off strategies can help you regain control of your finances.
List Debts by Interest Rate
Make a list of all debts owed with the corresponding:
- Total balance
- Interest rate
- Minimum monthly payment
Include credit cards, personal loans, student loans, auto loans, and any other debt.
Pay Down Highest Interest Debt First
Focus on paying off the accounts with the highest interest rates first, while continuing to make minimum payments on all other debts. This “debt avalanche” approach saves the most on interest payments.
Explore Debt Consolidation Options
If interest rates are very high, research options to consolidate multiple high-interest debts into a single new loan with a lower interest rate, which reduces monthly payments. This can help speed up how fast you pay off debt.
Stick to Payment Plans
Once you’ve mapped out a debt payoff plan, commit to following it until all debts are repaid. Stop relying on credit cards and loans. With focus and discipline, you can become debt-free.
Grow Your Income
As a single parent, increasing your income gives you more money to cover expenses, get out debt, and save. Explore all options to grow your earning power.
Research Side Hustles
Consider taking on a side gig that fits your skills and schedule. For example, if you enjoy writing, look into freelance writing opportunities. Monetize a hobby or talent.
Sell Unused Household Items
Go through your home and look for items you no longer use and could sell online via Craigslist, Facebook marketplace, eBay, etc. The money earned from downsizing clutter can add up quickly.
Negotiate a Pay Raise at Your Job
If you’ve worked for your employer for awhile and have added new skills, ask for a salary review and raise. Come prepared by researching typical pay for your position.
Apply for Child Support if Needed
If you are supposed to receive court-ordered child support that is not being fully paid, contact your State’s child support enforcement agency to get assistance receiving owed payments.
Adding more income gives you important financial breathing room and more flexibility as a single parent.
Safeguard Your Family Financially
Protecting your family is a top priority. Make sure you have adequate insurance coverage and take steps to secure your finances.
Review Your Insurance Needs
Meet with an insurance agent to review your insurance policies for:
- Health insurance – covers medical expenses
- Life insurance – provides for dependents if you pass
- Disability insurance – replaces income if you can’t work
See if coverage improvements or policy changes make sense for your situation.
Start an Emergency Fund
Begin building an emergency fund with $500-$1000 if possible, with the goal of saving 3-6 months of living expenses to cover unexpected costs. Even small, regular contributions will grow your rainy day fund.
Check Credit Reports Annually
Get your free annual credit reports from Equifax, Experian, and TransUnion. Review the reports closely for any errors or fraudulent activity. Maintaining good credit saves money.
Freeze Credit if Concerned
If identity theft is a concern, freeze your credit with each bureau until you need new credit. This prevents accounts from being opened without your knowledge, keeping you safe.
Plan for the Long-Term
While handling day-to-day finances is crucial, you also need to plan for the long-term.
Open Retirement and College Savings Accounts
Open dedicated retirement and college savings accounts like IRAs and 529s to start building funds for the future as soon as possible. Automate regular monthly contributions.
Take Advantage of Tax Credits
As a single parent, you may qualify for tax credits like the Earned Income Tax Credit, Child Tax Credit, and Child and Dependent Care Credit. Consult a tax professional to maximize savings.
Improve Your Credit Score Over Time
Having good credit saves you thousands on interest over your lifetime. Pay all bills on time and keep credit card balances low to boost your score over time.
Create or Update Your Will
Draft or update your will so your assets and guardianship preferences are legally documented. It provides peace of mind for your family’s future.
Thinking long-term and planning ahead is key to your family’s financial security and stability down the road.
Final Thoughts
Gaining control over your personal finances as a single parent starts with assessing your situation, making a realistic budget, having a plan to tackle debt, looking for ways to increase income, safeguarding your family, and thinking about the big picture.
While it can seem overwhelming, focus on taking it one step at a time. Be disciplined about sticking to your budget each month. Find small ways to save money and earn extra income. Keep chipping away at debts. Before you know it, your financial foundation will strengthen and you’ll have more flexibility to thrive as a single parent.
Being proactive about money management now will lead to a brighter financial future for you and your family. You’ve got this!
Frequently Asked Questions
How can I find government assistance programs as a single parent?
There are various government assistance programs that provide help to single parents who meet income eligibility requirements. Key programs to research include Temporary Assistance for Needy Families (TANF), Women Infants and Children (WIC), Supplemental Nutrition Assistance Program (SNAP), Medicaid, and Section 8 housing assistance. Reach out to your local Social Services office.
What are the best side hustles for single parents?
Some of the most flexible side hustle options for single parents include freelance writing, virtual assisting, affiliate marketing, selling handmade crafts or artwork on Etsy, work-from-home customer service jobs, online tutoring, and rideshare driving when you have availability.
How should I talk about our financial situation with my children?
Be open but age-appropriate when discussing your financial situation with kids. Let them know money is tight in simple terms. Involve older children in budgeting discussions and teach them smart money habits. Communicate that needs will be met but limits need to be set on wants. Stay positive and explain short-term tradeoffs can lead to long-term security.
Should I be investing as a cash-strapped single parent?
While investing extra income is wise, it may not feasible if you are barely covering your family’s monthly expenses. The priority should be building up a solid emergency fund first. But contributing any small amount like $25-50 per month into a Roth IRA or low-cost index fund can help you start growing your net worth.
What credit score do I need to buy a house as a single parent?
Most mortgage lenders want to see a credit score of at least 620, but many require 660+ for the most favorable interest rates. Anything under 580 will make securing a home loan very challenging. Improving your credit health should be a top focus, along with saving up for a down payment of 10-20% of the purchase price.
Are there grants available to help single parents go back to college?
Yes, options like the Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), and Iraq and Afghanistan Service Grant (IASG) provide money for college that does not need to be repaid. The application process begins with completing the Free Application for Federal Student Aid (FAFSA) form each year.
Disclaimer: The information provided in this blog post is for general informational and inspirational purposes only. We’re sharing this information to offer ideas, tips and motivation for starting a business, but this should not be considered professional advice. Starting a business is complex with many moving parts, and what works for one aspiring entrepreneur may not work for another. Before taking any action, please consult with legal, financial, tax and other relevant professionals to determine the best steps to take for your own specific circumstances. The financial estimates, costs, revenues, timelines etc. mentioned in this post are approximate numbers gathered at the time of researching & publishing this post and are subject to change. We do not guarantee any specific financial or other results/outcomes.
