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Bringing up a child on your own is a tough job. Not only is it hard to juggle all the responsibilities of your job while keeping your household afloat, it can also be extremely difficult financially. This has been especially true in the last decade when the cost of living has been outpacing the growth of income. Now that the economy has begun to percolate again, it seems as though things may be looking up for single parents.
One of the biggest concerns for single parents is saving enough money for retirement. With only one income and the high cost of raising children, it seems there’s nothing left to fund a retirement fund. The good news is that with a few strategies, single parents can indeed save money and build their wealth. You won’t just have to rely on your kids! Let’s review a few strategies.
1. Create a Budget
Many consumers don’t use a budget. Unfortunately, without one, they’re flying blind when it comes to managing their money. This usually means that, at the end of the month, there’s nothing left or they’ve overspent and have had to use credit cards to make ends meet. This is a bad way to go and can mean racking up thousands of dollars in debt over a period. If you’re ever going to be able to save money, you have to first start by living within your means.
If you’re willing to put in the hard work of putting together a thorough budget, you’ll be able to save yourself a lot of money. Building a budget will afford you the opportunity to really see where and how you’re spending your money every month. If you don’t know where to begin, many resources exist online to help you.
First, you’ll need to pull together all the details of your finances. The best place to start is with your pay stubs so you can determine what your take-home pay is after taxes. That’ll let you know exactly how much money you have to work with each month. Be sure to count only your net income, which is the value of your check after all the taxes and other deductions come out. The second step is to gather all your credit card and bank statements and any other monthly bills that you have. Lastly, you’ll want to try to determine what you spend on your variable expenses, such as gas, food, and entertainment.
Once you have everything together, you can start putting your budget together. You’ll be surprised at how the opportunities for savings will become apparent. While you probably won’t be able to save money on things such as your rent, mortgage, or auto loan, anything that’s a variable expense, meaning it can change monthly, is likely to afford you an opportunity to save money. Sometimes, just making small changes can add up to big savings every month. Consider things that represent wasteful spending first, such as purchases you don’t need. This can include things such as eating out too often or that expensive morning coffee. These are things you can easily cut out or cut back, which will save you significant money each month.
Also, take a closer look at your phone plan, cable bills, and other service contracts to try to eliminate services you don’t need. Scour your credit card and bank statements for recurring charges for things you no longer want or need, such as subscriptions for magazines, entertainment, or apps for your devices.
2. Stay Out of Debt
One of the best things you can do for yourself when trying to save for your retirement is to stay out of debt. When you have debt, you’re throwing countless dollars away each year in interest payments.
The first step toward becoming debt free is to create an emergency fund to handle any unexpected expenses so you don’t have to rely upon credit cards to cover them. If you have debt, develop a plan to pay it off as quickly as possible. Several methods exist that you can use, from consolidating your debt into a lower interest rate to utilizing the snowball method to setting up a three-year plan. A debt consolidation loan rolls all your debt into one loan with an interest rate that’s lower than what you’re currently paying on your debt. Sometimes, if you own a home and have equity in it, you can utilize that equity to consolidate your debt. This can either be in the form of a refinance with cash out loan or a home equity loan. If you don’t own a home, you may be able to take a personal loan to consolidate your debt. However, if you take out a debt consolidation loan, you must be disciplined to not run up your credit card debt again.
If you don’t want to take a loan or can’t qualify for one, you can utilize the snowball method. This method entails paying off your debts or credit cards one at a time, starting with the smallest balance and snowballing your payments into bigger and bigger payments until all your cards are paid off. If you want to pay off your debt in three years, you can check your monthly statement to determine the amount you’d need to pay each month. Credit card companies are now required to supply this information to every consumer. If you only pay the minimum required each month, it’ll take you years and cost lots of money in interest to pay off your cards. The important thing to remember is that once you’re out of debt, stay that way!
3. Save Three Months of Expenses
Once you’re debt-free, direct the extra cash flow toward building your emergency fund to equal three months of your monthly expenses. This is what financial experts recommend you have on hand to guard against an unexpected illness or loss of a job. Being out of work and having no income could lead to a catastrophic financial situation. Having a cushion to get you through could make all the difference in securing your financial future.
4. Work to Increase Your Income
Your income is your most important wealth builder you have, so the more you have, the better off you’ll be when it comes to building your retirement. You should always be looking to improve your income and marketability in your field of work. If you feel you aren’t progressing in the position you’re in, don’t be afraid to explore other opportunities in your field. Alternatively, if you feel you need a real change, don’t hesitate to look outside your field as well. Many in the workforce aren’t aggressive enough when it comes to asking for a raise; most times, they won’t get one unless it’s offered by the employer. In order to improve your financial future, you’ll need to work continuously to upgrade your career and your paycheck.
Perhaps consider taking some evening classes online to increase your worth in the marketplace, but don’t do it by taking out expensive student loans. You probably won’t get a good return on your investment. Many grants and scholarships exist that you can apply for; or, if you can, get your employer to help with tuition reimbursement.
If you’re creative or have a good, marketable idea, consider starting a side business. While starting a new business and working full time as a single parent isn’t an easy proposition, there are those that do it. If it’s something you can get the kids involved in, great! Try to come up with something that complements your current work schedule instead of conflicting with it so you have the time to devote to your new venture.
Many home-based businesses are available to consider as well. If you’re in need of a couple ideas, check out this list of ways to make extra income and then get started. Just be sure to do your due diligence and be careful when investing your money in anything you haven’t thoroughly investigated.
5. Downsize Your Life
When you really take the time to look at your life, you’ll be surprised at how easy it is to downsize it. Perhaps you’re driving a more expensive vehicle than you really need to be or living in a house or apartment that’s bigger than you really require. One of the best things about downsizing is that it adds simplicity to your life, so look for ways to simplify by eliminating bills you don’t need.
For example, many consumers have subscriptions that they never use such as for Netflix, HULU, or other entertainment. If you have cable, look to cut out expensive add-on premium services and take a less expensive package or plan. If you’re paying for a storage bin every month, take the time to clean it out; then, get rid of it. Most consumers have several items that are creating a drain on their bank account that they don’t even realize are doing so.
If you have extra space and can rent it to a friend or relative, you can reduce your monthly overhead considerably. Pooling resources is always a good way to save money. If you can, consider carpooling to work or after-school activities. Look to cut down on overhead expenses by turning off lights, lowering the thermostat, and packing lunches. Every little bit helps!
6. Make It a Family Affair
Kids are kids; they live very much in the moment. They don’t understand that parents have to plan for down the road. That’s why saying no to them is very hard, but if you’re a single parent trying to save for your kid’s college education and a decent retirement for yourself, you won’t be able to give them everything they ask for. While it hurts to say no to them and not give them everything they desire, learning to delay gratification is an important lesson for children. Teach your kids the value of hard work by providing them the opportunity to earn the things they want. Let them know how fortunate they are to have a safe place to live, food on the table, and clothes to wear. Many kids, even in America, don’t possess these things.
You can also get your kids involved in saving money by starting savings accounts for them and helping them find ways to earn money. Kids have all kinds of ways to earn money, such as cutting lawns, doing odd jobs for neighbors, and performing chores. They can also contribute by learning to conserve energy around the house, helping out with cleaning, taking care of the yard, and helping with the cooking. Remember, all these things build character, so there’s no reason to feel guilty for not giving your kids everything they ask for.
7. Contribute to a Retirement Account
It’s important to start a retirement fund as early as possible and start contributing to it on a regular basis. If you have a 401(k) plan at work, contribute as much as you can and take advantage of any match your employer offers. You should be putting at least 15% of your income away each month, so make sure you’re on track with those percentages in your contributions. If you don’t have a plan with your employer, start a Roth IRA, which will allow your money to grow tax-free, or a traditional IRA, which will allow you to deduct your contributions. If you’re not sure what to do, it’s worthwhile to pay for a consultation with a financial advisor. You can also look for a close friend or even coworker who can mentor you about saving and preparing for retirement. Whatever you do, start early and contribute as much as you can.
Being a single parent is hard in many ways. Having to make all the decisions and make ends meet on your own is a challenge. However, saving for a retirement is a very important part of life. Having the resources you need late in life is nothing you should minimize or put off planning. With a little planning and some hard work, you won’t have to!