How financial planning helps single mothers?
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Money is tight for many people these days. Paying for everyday expenses can be a challenge, and this is particularly true for single parents. If you’re the person who is primarily responsible for keeping your family afloat, you’re probably under a great deal of stress. You may wonder about the best ways to take care of your finances so that you can be sure there’s always enough for now and for the future. That’s where savvy planning comes in. Here’s what you need to know about financial planning for single mothers and how it can provide you with peace of mind.
Budget right
The first step to strong financial planning for women is to learn how to make a smart budget and stick to it. This type of planning helps you to keep track of where your money is going and ensures you are allocating your finances in ways that make sense. Budgeting also allows you to plan for your goals. In order to properly budget, you’ll need to crunch some numbers by taking a look at your total monthly income as well as your fixed expenses. Be sure to set aside a portion of what remains for emergency savings. There’s always something that comes up.
Be prepared
Not only do you need money set aside for life’s ups and downs. It’s also smart to be sure you’re properly insured for the unexpected. Health insurance is a must. Unexpected medical bills can be substantial. They’ve even sent many into bankruptcy. Join your employer’s insurance plan or check your state’s marketplace. You may be able to qualify for assistance to provide insurance for you and your children, depending on your income. Another type of insurance you should never be without is life insurance. This type of coverage will allow your children to be provided for in the event that something happens to you. Again, your employer may provide discounted rates for employees or you can purchase a plan independently. It’s a common rule of thumb that you should get a policy worth ten times your yearly income.
Understand tax benefits
Single parents are entitled to a number of tax benefits. You may want to get a qualified accountant to advise you so that you’re sure to claim all you’re eligible for.
Here are some basics to be aware of:
- Head of household
- Earned income credit
- Dependent exemption
- Child and dependent care credit
- Child tax credit
Claiming all eligible tax breaks can put a great deal of extra money in your pocket.
Plan your estate
“Estate planning” is a bit of a misnomer. You don’t need to have a tremendous estate or huge financial assets in order to plan for your estate. In fact, it’s one of the most essential financial tips for all single moms. All estate planning really boils down to is ensuring that your wishes are fulfilled when you’re gone. You should have a will. If you don’t, now is the time to meet with an attorney to help you make one. You will need to choose an executor to carry out your plan and will also want to designate a guardian for your children. In addition, be sure you’ve chosen a beneficiary on all insurance policies and retirement plans. Of course, these decisions will need to be made with thought and care. Talk to the people you are considering to be sure everyone understands and accepts their roles and that they know what to expect in the event of your passing. While estate planning is an emotional process, it is probably one of the most important things you can do for the future wellbeing of your children and is well worth the investment.
Prepare for your future
These events may seem far away, but your children going to college and your retirement are two events you should start planning for now. Even taking small steps can make a significant impact. Put money away in your employer’s 401K plan or another retirement program. You can also set up your own IRA. Look into college savings plans like a 529 college savings fund and an ESA, educational savings account, to get started.
These tips will help you to begin your financial planning journey. As you become more established, you can always sock away more money. What matters most is that you make a start now.