As a single parent, it’s not always apparent how you can get ahead financially, especially just on one income with dependents. However, there are financial strategies you can employ to stretch your income and help you lay the groundwork for a secure future. Consider the following to help improve your family's bottom line:
Identify Your Goals
First things first, you need to start off by defining your financial goals, because you can’t have a plan without goals. Start by recording all of your short, medium, and long-term financial goals. Short term goals could be how much money you plan on saving within the next month, or even could be something as simple as how much you spend on entertainment for your kids, or even for yourself. Whatever is important to you, define it and write it down so it can be a part of the larger plan.
For example, a child's education could be one of the biggest expenses in your future. Setting aside money for emergencies and planning for retirement are other important goals you'll need to keep in mind while raising a family that will come into play in your actions both in the short term future and in the long run. Don't let day-to-day concerns distract you from such important long term goals. Plan for today and tomorrow.
Be a Better Budgeter
In order to stay in line with your goals you’ve set for yourself and your family, it's necessary to manage your household's cash flow. That involves tracking income and spending, eliminating unnecessary costs, and living within the confines of a realistic budget.
For example, if you spend $2 each work day on a take-out coffee, that amounts to about $40 each month. By eliminating that minor expense from your budget, you could easily save almost $500 per year, which could go towards your child’s college education or even a small, local family trip.
Say No to Debt
High-interest credit card debt can make it extremely difficult to get your budget in order. If you have an outstanding balance, consider paying it off as aggressively as possible by eliminating other excessive costs in the meantime. The savings in interest alone could allow you to address other important financial goals you’ve mapped out.
It's also a good idea to review your credit history, commonly referred to as your credit report, to make sure that the information it contains about your past use of credit is accurate.
Capitalize on Tax-Advantaged Accounts
Once you free up some cash, apply it toward your goals. In fact, make it a goal on its own. Determine what percentage of your paycheck or salary you’d like to set aside each month, and do your best to stick to it. If there’s a month you can set aside a little extra, take advantage of it. Putting the money away will make everything much easier in the future for your other goals you’ve determined.
But first, learn about the savings and investment opportunities available to you. Keep in mind that tax-deferred investment accounts may enable you to grow the value of your assets more significantly than taxable accounts. Examples of such accounts include 401(k) plans and IRAs for retirement planning.
For college goals, look into Section 529 college savings plans. These plans are state-sponsored investment programs that allow tax-free withdrawals for college expenses. College savers who contribute to their home state's 529 plan may be eligible for state tax breaks. For more information on 529 plans, please refer to our college savings option blog.
Consult an expert
At the end of the day, you don’t have to do this alone. Speak to a financial expert who can work though all of your goals with you, as well as advise you on the best steps for you to achieve those goals.
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