Eleven Steps Single Moms Need to Take

Single moms have mastered the art of multi-tasking.  Working, making phone calls, vacuuming, paying bills, feeding kids and taking them places, responding to emails ….just a snapshot of a single mom’s normal routine.  But often single moms – who are able to manage so many things for so many others – feel overwhelmed by the time and effort it takes to manage their own financial futures. Following are eleven things that single moms can – and must – do to get a handle on their finances both for today and for well into their future:

  1. Set some goals.  It’s essential that you carve out some time – even just grabbing 15 minutes here and there – to really think about what you want for yourself and your family.  Then set some short-, medium- and long-term financial goals for you and your family.  Writing those goals down will provide you with a constant reminder for why you’re saving money (when it gets really hard and tempting to give up) and a game plan for how you need to invest it to be successful.  For example, if one of your goals is to be able to help your children go to college you could try to set aside even just $25 from each paycheck and deposit it into a 529 state-sponsored college savings fund.  If you get into the discipline of setting goals while your children are still young, your savings can earn a significant amount of interest and you can make real progress toward your goal.
  2. Budget for your sake—and your kids.  One of the keys to successful single parenting is to make decisions in advance and act on those decisions so you’re not feeling like you’re constantly making choices as things come up and circumstances change.  That includes managing your finances.  One way to begin moving in that direction is to create a realistic budget that you can really stick with.  Budgeting—setting categories in advance as to what you’ll spend money on and what you will save money toward-- can help ease your stress by making a lot of your daily decisions in advance.  It can also alleviate some of the stress when managing kids’ requests.  It’s easier to explain that you, as a family, have already decided what you will and won’t spend money on instead of having to make a “yes or no” decision in response to their demands in the middle of a store aisle.  Budgeting gives you information, enables you to act on your priorities, and gives you a framework to work within to create some financial order  in your family’s life.  Learn how to create a budget with our interactive budget worksheet.  If you work one or more jobs that pay on an irregular basis (i.e.freelance, seasonal or periodic work) learn how to create financial stability and structure without a steady paycheck.

  3. Create an emergency savings fund.  Most single mothers live on a thin financial edge.  One unexpectedly large bill, cutback in work hours, illness or accident can mean the difference between being financially squeezed and being pushed over the edge.  You need to create a financial cushion, an emergency savings fund.  Look over your budget and identify places where you can cut back or think how you might save to build up enough cash reserves to meet at least three, and preferably six, months’ of expenses.  Then consider meeting with a representative from your bank to discuss options of where you could save and maybe even invest that money in a low-risk investment vehicle (such as a money market fund or CD) so that the money is working for you and there when you need it.   Don’t spend it unless you have an emergency; if you have to dip into the fund, replenish the amount as soon as possible.
  4. Protect yourself and your financial future.  As a single parent you know that the burden of caring for yourself and your kids now, and in the future even if circumstances change, falls squarely on your shoulders.  That’s why it’s important to protect what you have and create some financial protection in the event of unforeseen circumstances.  Learn more about insurance products.  Of particular importance for single parents to consider:  life insurance, to preserve money and property for your dependents in case you pass away, and disability insurance to preserve your income in the event that you become unable to work due to an unexpected injury, accident or illness.  
  5. Create a will and contingency plans.  Did you know that 70% of all Americans die without a will?  Not having a will means that that the laws of your state will determine who gets your financial assets, possessions and property.  You can lose up to half of the value of your estate if you don’t have a will because it will have to go through a disposition process called probate.  In addition to a will you should consider creating a living will and durable power of attorney.  Those legal documents will give the person you designate the power to express, and carry out, your wishes if you become incapacitated.  Making those choices will ease your mind and the burden on your children in the event that something happened to you beyond your control or ability to recover.  Not having made arrangements before you die, can also mean an ex-spouse, family member or the state can decide who will serve as legal guardian to raise your children.  Making a will also ensures that the court knows – and will enforce – your wishes regarding guardianship for your children, perhaps the greatest concern for any single mother.
  6. Keep focused on long-term personal financial needs.  You know, perhaps better than anyone that you need to be able to take care of yourself.  That means both now and in the future.  While you’re working now – even if it’s just part-time, temporarily or if you go in and out of the workforce while you’re trying to balance work and family – you need to be committed to saving for your own retirement.  Begin by calculating an estimate of how much you’ll need to save for retirement.  Then, if you work for a company that offers a retirement savings plan, like a 401(k) savings plan, sign up for it and contribute as much as you can afford out of each paycheck.  You’ll be lowering your taxes (since contributions are made pre-tax) and your savings will be invested long enough to compound interest creating additional future income.  And you may also be able to receive “free” money to match some of all of what you save from your employer.  You can also contribute to a Traditional Deductible Individual Retirement Account (IRA), Traditional Nondeductible IRA, Roth IRA, Keogh Plan or to a SEP (self-employed IRA) if you are self-employed.  Even if you’re not currently working, or if you frequently cycle in and out of regular employment, it’s important to do as much as you can to save for retirement while you’re not working.
  1. Manage credit card debt.  It can be easy to start using credit at first to meet emergency or one-time expenses and then quickly as a way to supplement your income on a regular basis.  But accumulating credit card debt can quickly spiral into a financial obligation beyond your ability to pay.  It can easily become something that starts to affect your ability to make decisions about the income you need to make and the type of job you need to land; and a host of other daily decisions for you and your family. Learn why credit card debt is considered the “anti-investment,” why you should care about how you use credit and tips for keeping your credit habits under control. Know the difference between a credit card and a debit card and how to wisely use a debit card.
  2. Establish or improve a credit history. You may not have yet had the opportunity to establish a credit history by wisely using (and repaying!) credit or loans.  Or you may have had some credit experience with student loans, credit cards or personal loans and not done so well in repaying them.  When you don’t pay more than the minimum amount due on your credit cards on time, or meet the loan repayment terms, your creditors will notify the three major credit bureaus.  Those notices will go on your credit report and could affect your ability to get a loan in the future. If you haven’t established a credit history, talk with someone at your bank, or visit Bankrate.com’s list of secured credit card issuers, about getting a secured credit card.  With a secured credit card you make a cash deposit into an account and the bank (or credit lender) issues you a card to make charges up to that amount.  As you repay the amount charged over time your creditor will most likely increase your credit line and you will be establishing a good credit history.  Learn more about credit reports including how to get a free copy of your personal credit report.
  3. Invest in your own education—and that of your kids.  If going back to school full-time is not an option, consider taking classes part-time to finish your degree, gain additional job certification or learn additional skills.  Additional education will provide you with greater career and earning opportunities which can buy you future financial security.   And remember to encourage your kids to also pursue additional education beyond high school.  By setting aside even a small amount of money each month toward their college educations – through vehicles such as a state-sponsored 529 college savings plan you can point to the investment you’re already making for their future and encourage them to pursue it as well by working hard in school and talking with a counselor at their school about financial aid and scholarship options.
  4. Get smart, plan ahead and make as much of it “automatic” as possible. The only thing that may seem less scarce to a single mom than money is time. Wouldn’t it be nice to save both money and time?   After setting up your budget, talk with someone at your bank or credit union about how to have a set amount of money automatically deposited into a designated account – such as a savings or money market account – every pay period, monthly or quarterly.  Or talk with a financial professional or investment advisor about having money regularly, automatically deposited into a CD or mutual fund.  When you pay yourself first you are more likely to keep your commitment to save and will reach your goals sooner.  Take advantage of opportunities to improve your financial picture by planning ahead to save—or spend—such as making sure you participate in any employer-based retirement savings plan (such as a 401(k)) or pre-tax flexible spending account (FSA) or healthcare spending account (HSA) to both save for future expenses and lower your taxes.  
  5. Find support systems and resources.  Just because you’re single doesn’t mean you have to go it alone.  There are support systems and resources to help single moms manage their money.  If you are having difficulty making ends meet or managing your money, you may want to look for seminars or classes on the topic at a local community college, library or even your place of worship.  You can also find a locally-accredited credit counselor affiliated with the National Federation of Credit Counseling who can help you with budgeting, paying down credit and managing your finances.  Learn how to select and work with a financial professional.