As a single parent, the entire financial responsibility is on your head. No one in your family can back you to meet all of your expenses. Half of the money goes toward all costs except for personal debts and personal expenses when you have a partner.
Since you are a single parent, you do not have to manage your expenses all alone, but you also have a burden on your children’s needs. It can be overwhelming to bear such expenses.
Financial planning is quite challenging as a single parent, but it does not need to be that difficult. Now the question is what financial planning is.
What is financial planning?
It is an approach of taking a comprehensive look at your current finances and then making a financial plan to reach your goals.
You have to ensure that you are able to keep up with your debts as well as saving money for your future goals like buying a house, a car and building retirement funds. Here are some of the tips for planning your finances as a single parent.
Create a monthly budget
A monthly budget is necessary to track all of your expenses. A budget helps you set aside a fixed amount of money for your all costs, including daycare. You should grab the bank statement of previous months to get an idea of your average spending.
Once you have an idea of how much you need every month, you can plan your monthly budget accordingly. Since you are on a budget, you should try to cut back on your expenses as much as possible.
Remove those expenses that are just inessential, so you have more wiggle room. It will be a better approach to categorise your expenses and allocate a certain amount of funds to them.
For instance, you can set up categories like groceries, travel, medical expenses, day care, financial obligations, and the like. By creating such categories, you will better understand how much money each of them is eating up every month.
Track your payments
You cannot sit back just because you have set up a different category for all of your expenses. You will have to keep tracking your expenses. It is not surprising that you find that you have spent money more than you should have at the end of the month.
It can result in the decline of your savings. This is why it is suggested that you track all of your expenses periodically. You can do it weekly or bi-weekly, so you do not end up overspending.
Make sure that you set aside money you have to pay for your debt as soon as you receive your paycheque and do not dip into it, no matter what. If you have come up with an unexpected expenditure, you should try to fund it with an emergency cushion.
You build an emergency corpus for a rainy day. Note that savings for your retirement fund and housing and car all are different from it. This will help you tide over when you come up with unexpected expenses.
However, you will be able to have some money in your emergency cushion only when you sensibly spend your money.
It is not recommended to dip into these funds for regular expenses. If you are still running out of money, you can take out a loan. Seek single parent benefits in the UK because you do not have to return that money as you do in case of borrowing money.
Do future planning of your finances
Although you have set aside money to buy a house, car, or retirement, it is not financial planning. It is much more than that. If you keep money idle in your account, it is not going to give you anything.
You are instead hurting the present value of money. You should invest this money in stocks, bonds and mutual funds to make money. When you invest in these assets, you can make money in the form of returns. This will surely help you avoid losing the present value of your money.
However, it seems easy, but it is not. Investing is subject to market risk. Stocks and mutual funds are volatile, and you can lose money if you do not evaluate your risk tolerance capacity and financial goals.
You should consult a financial advisor because they can take a look at your current financial situation and determine risk-bearing capacity. This information will serve as a basis for deciding what kind of assets you should invest in.
Saving and investing are two sides of the same coin. When it comes to financial planning, they go hand in hand.
This is why you should focus on both of them instead of one over another. One of the significant benefits of investing money is you can have cash coming in the form of returns.
You can use that money for your unexpected expenses when an emergency cushion falls short of cash when you have a cash surplus. This is a great way to manage all of your costs and your children. You can avoid borrowing money.
The bottom line
Financial planning as a single parent is not that easy. When you have a lot of burden on your children’s expenses, it becomes overwhelming.
However, you do not need to worry about it. The tips mentioned above can help you manage your expenses smoothly. Save, invest and track your spending to gain better control over your finances.
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