With 13.6 million single parents in the United States who are responsible for raising 21.2 million children, according to the 2007 U.S. Consensus, what is considered to be a “traditional” family is certainly being reassessed. With all of the family responsibilities placed on one parent, it is understandable that certain financial decisions are often forgotten. But it is crucial to make time to straighten out your finances in order to secure your and your children’s financial future.
Managing a family and a household while holding down a job is enough to keep any single parent busy. Actually, organizing your family’s finances can get pushed to the bottom of your never-ending list. However, be mindful of the following seven steps when single-handedly overseeing your family finances.
Develop a Budget Plan
A majority of your money is probably going toward your necessities, which include housing, childcare, health insurance, food, clothing and gasoline. But, how much money is going toward each category? Are there ways to cut back and simplify your spending every month before your income is completely spent? One means to determine this is to examine your spending over a period of two or three months. Be organized and write down how much is spent on what. Then, create a budget based on the average amount spent in each category.
Set Goals and Organize Priorities
Put your priorities in order to avoid overwhelming financial needs all at one time. Write down your short-term, mid-term and long-term goals and come up with a plan to achieve them. When factoring these goals into your budget, distinguish the absolute necessities from the wants.
Save for College and Retirement
Regardless of the amount of money you have to set aside for both college and retirement, put aside a certain sum on a regular basis. It will add up, and compound interest will prove to be beneficial over time. According to www.sec.gov, savings plans like the 529 Plan help encourage savings for the future. Make sure you have money deposited directly from your paycheck into a state-sponsored Section 529 college savings plan in your name and also into a 401(k), especially if your employer provides a matching contribution.
Have an Emergency Plan
Because you are your family’s sole provider, it is vital to make sure you have enough disability and life insurance to cover your income and confirm your children will be taken care of in case of an emergency. When looking for life insurance, shop around for the best deal. Do the necessary research, ask questions and check that the insurance coverage you carry is sufficient to meet your needs and those of your children.
Establish an Estate Plan
You should name a guardian for your minor children and detail how you want your money distributed to them in your estate plan as well as your will. You do not have to own a mansion to develop an estate plan. It’s just a way to ensure that your wishes for your children are known, should something happen to you.
Be Aware of Tax BreaksYou most likely qualify for the childcare tax credit as a working parent. Depending on your income and according to www.irs.gov, the credit allows you to deduct a percentage of up to $3,000 in daycare bills for one child or $6,000 for two or more children. Also, filing “Head of Household” rather than “Single” gives you more tax breaks.< /p>
Be Open and Honest With Your Children
Involve your children with finances. Take ample time to have an honest discussion with them about the family’s economic situation, especially if you are a newly single parent. Teach your kids the skills and knowledge to get involved in helping the whole family curb spending. Educate your children to prepare them for their own financial future and security.